If there is anything in this world that is certain it’s the fact that everyone likes to save on their taxes when April rolls around. If you have purchased a home in the last year you are going to want to make sure that you have remembered all the allowable tax deductions.
When taking out a mortgage to buy a home, there are certain deductions that the IRS allows that you are going to need to remember. The list below summarizes the deductions that many people forget about when buying Real Estate:
MORTGAGE POINTS
Points paid when taking out a mortgage are tax deductible if they are used to reduce the mortgage interest rate. In the event you don’t know, a point is 1% of the loan amount. For example on a $200,000 mortgage a point would equal $2000.00.
Typically most people would not want to pay points on a loan unless the expectation was to be in the home for a while to recapture the cost of such points in the form of reduced payments. In order to figure out if paying points makes sense, you need to calculate the mortgage payment amount both with and without points.
By looking at the spread between these figures you can determine how long you would need to be in the home before it would make fiscal sense. For a complete explanation see when to pay points on a mortgage. Points or origination fees paid when you buy a home or other Real Estate are generally tax deductible in full for the year that you pay them.
It should be made clear that origination charges from the lender that constitute a “service fee” are not tax deductible. Another method you could make is to amortize the points over the term of the mortgage. This choice is usually made only when your itemized deductions are less than the standard deduction for the year you purchased the home.
Additionally when you refinance a mortgage the points must be deducted over the term of the loan. If you deduct points over the term of the loan and sell the home or refinance it again before the loan expires, you can deduct in the year of the sale or refinancing any points that you didn’t previously deduct.
Keep in mind that you will be able to get the best mortgage interest rates when you have a great FICO Credit Score.See how to increase a credit score to help in your efforts to get a terrific interest rate.
To continue reading the full article see home buying tax deductions.
About the Author: The above Real Estate information on Real Estate mortgage tax deductions was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of Metrowest Massachusetts for the last 25+ Years.
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