IRS Publication 530: Tax Information for Homeowners

What Is IRS Publication 530?

IRS Publication 530 is a tax document for homeowners that details how tax filers should treat costs related to owning a home. It provides valuable information on how to manage mortgage interest, closing costs, taxes, capital gains, and repairs. When consulting this document, be sure you have the most up-to-date version as legislation passed in Dec. 2019 affects these rules.

Understanding IRS Publication 530

IRS Publication 530 is an Internal Revenue Service (IRS) document containing tax information for homeowners. The types of properties IRS Publication 530 could refer to include houses, condominiums, co-ops, mobile homes, apartment homes or house trailers that contain sleeping spaces, toilets, and cooking facilities. 

This document outlines what home-related items can be deducted when filing federal income taxes, including mortgage interest, mortgage insurance premiums, and state and local real estate taxes. Items that cannot be deducted include utility payments, other insurance costs, and most depreciation. Taxpayers must fill out Schedule A of Form 1040 to itemize home-related expenses. Itemizing deductions in this way means that the standard deduction cannot be claimed.

Publication 530 also explains what to include when determining the total amount paid for the house (cost basis) and how to adjust this figure over time (adjusted basis). This is important for determining financial gain or loss when a house is sold in the future.

In addition, this publication describes how to claim a mortgage interest credit. The purpose of the mortgage interest credit program is to make home ownership more affordable for lower-income buyers. To quality for this credit, a homeowner must have received a state or local government-issued Mortgage Credit Certificate (MCC) and submit both Form 8396: Mortgage Interest Credit and Form 5405 — Repayment of the First-Time Homebuyer Credit.

Real Estate Taxes

State and local governments typically charge an annual tax on the value of property called a real estate tax. A homeowner may deduct this tax if it is assessed uniformly on all real property throughout the community.

Itemized charges for services to a specific person or property are not considered taxes, even if the charges are paid to a taxing authority. Additionally, a unit fee for delivery of a service is also not deductible as a real estate tax. Other charges that cannot be deducted as real estate taxes include periodic charges for a residential service, such as a $30 monthly charge or a $200 annual fee for utilities, and flat fees charged for a single service provided by local government, such as a lawn mowing fee because the homeowner’s lawn had grown higher than permitted under city ordinance.

These types of charges should be included in a homeowner’s real estate tax bill. IRS Publication 530 encourages homeowners to contact their taxing authority if they do not receive a copy of their real estate tax bill with information about real estate taxes and non-deductible itemized charges.