Taxes and Home Ownership Moving to Las Vegas will typically increase your cash flow because of the lack of State income taxes and a favorable cost of living comparison to many other cities. The following is information about some of the specific tax advantages of owning Las Vegas real estate.

• What tax benefits are there to homeowners?
• Are property taxes deductible?
• Are taxes on second homes deductible?
• What home buying costs are deductible?
• Are there tax credits for first time home buyers?

What tax benefits are there to homeowners?
Homeowners benefit from several generous tax advantages. The most important benefit is the mortgage interest deduction. People may deduct interest paid on mortgage loans totaling up to $1 million used to buy, build or improve a principal residence plus a second home. The IRS calls such loans acquisition debt.

Points paid by the buyer or seller on a new mortgage loan for the purchase or improvement of a principal residence are deductible for the year in which the home was purchased.

Any points paid on a refinance mortgage, a loan to purchase a second Las Vegas home or a mortgage on income property must be spread over the life of the loan, according to Edith Lank and Miriam S. Geisman, authors of "Your Home as a Tax Shelter," Dearborn Financial Publishing, Chicago; 1993.

Note that when obtaining a new mortgage, the borrower usually is asked to pay interest from the closing date until the first of the next month. Check whether that charge is included in the year-end report. Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income, say Lank and Geisman.

"A homeowner cannot deduct maintenance expenses, nor can he take depreciation deductions on his personal residence," states the "Realty Bluebook," 30th Ed., Dearborn Financial Publishing, Chicago; 1993.

Some moving expenses are deductible for people who changed jobs and relocated as a result. The IRS requires that the new employment be located at least 50 miles away, among other considerations, said Analisa Collins-Sears, a public affairs officer with the IRS' Bay Area office.
Resources: * "Tax Information for First-Time Homeowners," a free guide published by the Internal Revenue Service. Order by calling 1-800-TAX-FORM.

Are property taxes deductible?
Property taxes on all real estate, including those levied by state and local Las Vegas area governments and school districts, are fully deductible against current income taxes.

Are taxes on second homes deductible?
Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

What home buying costs are deductible?
Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year.

But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan.

Are there tax credits for first time home buyers?
Many city and county governments offer Mortgage Credit Certificate (MCC) programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier.

Requirements vary from program to program. People wanting to apply should contact their local housing or community development office.

Here is a list of four general requirements to keep in mind:

* Some credit may be claimed only on your owner-occupied principal residence.
* There are maximum income limits, which vary by locality and family size.
* You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.
* Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.

Please contact us if we can answer other mortgage-related questions as you go through the process of buying your Las Vegas home. And for a listing of available Las Vegas properties, use the Free Las Vegas Homes MLS Search.