Last Minute Tax Tips and Deductions for Homeowners
Mortgage News from Quicken Loans
It's that time of year again--time to file your taxes. But every year, over two million Americans overpay their taxes and end up giving the U.S. government an extra $945 million, according to the General Accountability Office.
You can become a wiser homeowner if you remember to take three important tax deductions allowed by the government:
Mortgage Interest
When you take out a mortgage, you must pay interest on the loan. Unfortunately, many homeowners are unaware of the fact that the interest may be tax-deductible, no matter what the interest rate. The interest you deduct may be secured by a loan on your first or second home. Be sure to talk to an experienced tax advisor--your deductions may be limited by whether the mortgages on your home total more than the fair market value of the home.
You may deduct up to $1 million in the value of your home. For example, if your mortgage balance exceeds $1 million, your maximum deduction is the same as if you only owe $1 million.
You can also deduct up to $100,000 in home equity debt. However, if you took the home equity loan out for buying another property, or building or improving your home, you may deduct up to the maximum loan amount.
Points Paid on a Mortgage
If you refinanced your mortgage and bought discount points to reduce your interest rate, you may be able to deduct the points. Points are deducted proportionately over the life of the loan. So if your new loan has a 30-year term, you can deduct 1/30th of what you paid for your points each year.
If you bought a new home and bought points, you can deduct that amount for the year you bought the home--and it doesn't matter whether you or the seller paid for those points.
Property/Real Estate Taxes
Property and real estate taxes are based on the assessed value of your property. State and local property taxes may be deducted as an expense against income. Real estate taxes are only deductible in the year they were paid to the government.
Be sure to check your mortgage interest statement or your canceled checks to find out the total amount of real estate taxes you may deduct.
Capital Gains on the Sale of a Home
If you're not married, then once every two years, you can take a profit of up to $250,000 when you sell your home without having to pay taxes on it. The only stipulation is that the home must have been your primary residence for at least two of the last five years.
If you're married, filing your taxes jointly, and selling your home, you may take a profit of up to $500,000 without paying taxes on it. Again, the same stipulations apply.
There may be many tax deductions you could be missing out on. Make sure to consult with a reputable and experienced tax advisor before you file your taxes this year. It could be costing you more money than necessary.
This article is reprinted by permission from Quicken Loans © 2007 Quicken Loans Inc. All rights reserved.
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