You’ve likely received your W-2 and other tax forms recently in the mail. So you may be thinking about filing your taxes. And if you’re a homeowner, that means you may qualify for extra tax deductions.

While taking these deductions means you’ll have to itemize them in a Schedule A form (which is more complicated than standard deductions you may have taken on previous tax returns), it is well worth the time. And, in the long run, could mean more money back to help pay your mortgage or other expenses.

Here are the three most common tax deductions you can claim:

1. Mortgage Interest

For the first few years of homeownership, the bulk of your monthly mortgage payment goes toward interest. And all of that interest is tax deductable. However, if your mortgage amount is over $1 million, then the IRS will limit your deductible interest.

If you own a second home, your mortgage interest is also fully deductible. You can even rent out your second home as a vacation property and still receive the mortgage interest deduction. However, in order to qualify for this deduction, you must stay at your vacation home for at least 14 days of the year.

2. Mortgage Points / Origination Fees

If you paid points on your home purchase or refinance, you can also deduct them from your tax return. Lenders charge points or origination fees when they originate a loan. These points are usually based on a percentage of the loan.

For a new home loan, you can deduct all of the points you paid in that year. However, you need to make sure you meet the IRS’s qualifying conditions, such as:

• The loan is to build or purchase your main home,
• The payment of points is an established business practice in the area where your loan was made.
• The points paid are typical of points in your area.

For second homes, any points paid must be amortized over the life of your loan.

Also, if you refinanced a loan, any points will have to be amortized over the life of your loan. So you can only deduct that amortized portion each year.

Many homeowners often forget about this amortized amount, so make sure you keep good records regarding this deduction of points on your refinanced loan.

3. Property Taxes

You can deduct state and local property taxes paid during the year on your main home and any other properties you own. These taxes are an annual deduction for as long as you own your home(s).

If you’re considering a new mortgage or you want to refinance, contact a trusted mortgage broker firm, like Grandview Lending, for assistance. We can help you determine what the best option is for you.

 

Disclaimer: The information contained in this document is not intended or written to be used in place of advice from an independent tax advisor.

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