Some costs at closing can be deductedHOUSE CALLS

Q: My wife and I purchased a home and moved into it in 2007. Now we are assembling our documents to file our income taxes for last year. However, it is not clear what is deductible for 2007 taxes on the house listed as closing costs, which amounted to $15,000. Should the Realtor or closing attorney provide us with a detailed document listing what is tax-deductible? -- A.

A: You can deduct any property taxes you paid at closing, and any mortgage interest. If your mortgage lender charged "points" at the closing, then they count as interest, and you can use them as a deduction. That's true even if they were paid by the seller.

Homesellers' tax break

works only on residences

Q: If you own a piece of land, can you write off $500,000 if you own it for more than five or 10 years, and then sell it at a profit? -- T.J.

A: You must be thinking of the special homesellers' exclusion from capital gains tax. That applies only to one's own residence, not to a piece of land. Once you've owned the land for more than a year, though, your capital gain will qualify for favorable low long-term tax rates.

Surviving spouse

selling home

Q: My sister passed away in November 2006. They lived in California, and my brother-in-law will have a very big profit when he sells their home. He couldn't get it into shape to sell until 2007, and someone told him that means he can't take the whole $500,000 tax-free gain, only $250,000. Did he have a year to sell and take the $500,000, or was it just if he sold in the year my sister died? -- E.M.

A: Your brother-in-law was entitled to file a joint-income tax return for 2006, so he could have used the full homesellers' $500,000 exclusion from capital gains tax only if he sold during that calendar year.

All is not lost, though. In most cases, a surviving spouse has a new cost basis on the home, depending on how the couple held title and the state they live in. I believe that in California, which is a community property state, your brother-in-law now has a "stepped-up" cost basis for the home, probably for its full value. That would leave him little or no taxable gain, certainly covered by the single taxpayer's $250,000 exclusion. He should check it out with a tax professional.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.