If you own a home you are probably already aware of the tax advantages associated with deducting your mortgage interest payments. After all, this is the big deduction that has been in the news lately and is often touted as a great reason to become a homeowner. However, there are a couple other deductions that are available to homeowner’s that you might not be aware of.
Did you purchase or refinance your home? Did you pay points? More than likely you did and they are in most cases tax deductible. Each point is 1 percent of the loan amount. Lenders charge points as a way to make a profit, and borrowers generally pay points in exchange for lower mortgage rates.
If you paid points, the amount should be listed on the 1098 statement from your lender. This document also notes how much mortgage interest you paid. You can also find this information on your Settlement Statement that you received at closing. Even if the seller pays all the points, the buyer gets the deduction. Exactly how much of one and when you can take the deduction depends on your loan circumstances.
If you purchased the home as your primary residence you should be able to deduct the points paid in the same tax year as the purchase as long as you meet all of the requirements (see IRS publication 936). If you refinanced or do not occupy the home as a primary residence then you still have the opportunity to deduct the points over the life of the loan.
Lastly, don’t forget to deduct property taxes. This amount will also show up on the tax form you receive from your lender. If you purchased a home in the current tax year you can find the amount on your Settlement Statement. Taxes are an annual deduction for as long as you own the home.
As with all tax related deductions there are rules and stipulations. Contact a qualified Accountant to see how these deductions pertain to your particular situation. After you complete your taxes and you find yourself needing more deductions…contact me…it might be time to buy a home!
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