Homeowner Tax Tips
The Top 6 Tax Tips for Homeowners
1. Deduct Your Mortgage Interest
Usually, the mortgage interest on your home is completely tax-deductible. And you can deduct interest on multiple mortgages. Just make sure they do not exceed $1 million. The purpose of the mortgage must be specifically to buy, build or improve a home.
Your lender will send you a “Form 1098.” This form shows exactly how much mortgage interest you paid for the year. To claim this deduction, fill out Schedule A (it’s labeled “itemized deductions”) and record your interest deduction.
You can also deduct late payment charges as home mortgage interest. Just make sure it is not for specific services received in connection with your home loan. The same is true for mortgage prepayment penalties: if you pay off your mortgage early and incur a prepayment penalty, you can deduct that penalty as home mortgage interest. This is subject to the same requirements for late payments.
2. Deduct Your Real Estate Taxes
Real estate taxes are the annual taxes based on the assessed value of a property. They are also tax-deductible. Your interest statement may list the amount of real estate taxes you paid if your taxes and homeowners' insurance were placed in an escrow account when you closed on your mortgage. It’s possible that your real estate taxes are not included on the statement. In that case, review your cancelled checks to determine your total real estate tax amount.
3. Deduct Your Loan Points Paid on a Purchase
The points you pay on a purchase mortgage are deductible the year you made the purchase. Deduct any points you paid — and that a seller paid on your behalf — if you meet the following criteria:
• The loan is secured by your primary residence. And, the loan was used to buy, improve or build the home.
• Make sure that paying points (and the amount of points paid) is not an irregular practice in the seller's geographic area.
• Be certain the points are computed as a percentage of the loan principal.
• The points must be clearly delineated on the buyer's settlement statement.
• You put cash into your home purchase in an amount at least equal to the points you were charged.
Check out other real estate tips and advice like the tax tips for homeowners in Articles and News .
