What is meant by the term HUD-1 Settlement Statement?
The HUD-1 Settlement Statement happens to be termed after the Department of Housing and Urban Development. This is a listing of settlement charges and closing costs paid by the seller and buyer of the home. The subtraction and addition of the figures on this form conclude the amount of the mortgage. This can be compared to the importance of bookkeeping in providing all the necessary and relevant information from which all the accounts are formulated.
The Internal Revenue Service (IRS) permits property holders to subtract an amount of the closing costs on their federal income taxes. The homeowner should list on their Form 1040 to ask for the deductions. The amount of the deductions will be determined by whether the homeowner is refinancing a current mortgage or purchasing a home.
First, let’s take a look at the closing costs that can be deducted on the acquisition of a home, that is gaining a new mortgage. You will find that the HUD-1 Settlement Statement is lengthy and has different numbers. Every section has an exclusive number right along the edge that will help in identifying all those figures that can be deductible. If you take a look at the first section (section 106-107), you will see pre-paid real estate taxes, for instance, County taxes and/or City/Town taxes.
The homebuyer deducts these taxes on the day of the sale of the house. This will be recorded on Schedule A as an itemized deduction.
A common mistaken belief is that Homeowner’s Association fees and Condominium fees are a legal tax deduction when they are not so. HOA/Condo and assessment fees for the main home are, in fact, not tax-deductible.
How to Use QuickBooks Online to Record a Hud-1
Click on the plus sign. Then, on the right-hand side, you will see Journal entry. Click it.
- First, you need to make sure that the date on the entry is the same as on the HUD 1
- Line 1 will be the purchase amount in debit. You should be aware that the account is the address, not rehab.
- The next line will show the property taxes in debit. You will enter the account details as property taxes expense.
- The next line mentions loan origination payments in debit. You will enter the account details as loan fees expense.
- The next line mentions loan fees. (These fees can be doc prep fees, lenders application fee, draw fee, wire fee, and lender assignment fee) You will enter the account details as loan fees expense.
- On the next line, debit Draws in and mention escrow in the description. Loan escrow.
- On the next line, you will debit pre-paid interest to the lender. You will enter the account details as to interest expense.
- The next line mentions total title fees ( these fees can be lien cert, title search, title insurance, title examination, recording services, and judgment report). You will enter the account details titled as fees.
- On the next line, you will record the fees ( assignment recording fee, deed and mortgage, State tax Deed, county tax deed, and mortgage and county transfer tax). You will enter the account details titled as recording fees.
- On the next line, you will credit earnest money. The account details will be escrow/title.
- On the next line, you will credit the total loan amount. The account details will be titled loan payable to (mention the lender’s name).
- On the next line, you will credit the adjustment for items that are unpaid by the seller. The account details will be titled utility.
- On the credit side, enter cash from the borrower. The account description will be titled cash due from the buyer.
- On the next line, you will enter the survey (if you have one). The account description will be titled survey.
- Check and see if both the credit and the debit side is balancing. If not, check the HUD and see the missing numbers.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
