Homeownership is a dream that many people have, but it can seem like a daunting commitment with little to nothing in return. Some even choose to rent a home over owning a home, but there are actually a lot of great monetary rewards that come with owning your own home.
There are some great itemized tax deductions available for homeowners that you are able to deduct every year.
Local and state real property taxes can be deducted, but remember that real estate taxes are only deductible in the year they are paid. For example, if your lender holds money in escrow for taxes due in 2016, you cannot take a deduction for those taxes in 2015.
It is required that mortgage lenders send an annual statement to borrowers by the end of January every year that shows the amount of real estate taxes and mortgage interest that have been paid by the owner of the home during the previous year.
Mortgage interest loans on a first or second home are completely deductible but are subject to a number of limitations like the acquisition of loans up to one million and home equity loans up to $100,000. If you are married but file separately, these limits are split in two.
Some mortgage lenders will permit you to pay one or more points to get a loan. The more points you have, the lower your mortgage interest rates should be. These points are sometimes called premium charges or loan origination fees, but they’re all still points. Each point is 1% of the borrowed amount, for example if you get a loan of $10,000 each point would cost you $1,900.
The IRS has determined that even points paid by sellers are still deductible for the homebuyer. Though any points paid to a lender when refinancing your current mortgage aren’t completely deductible in the year they’re paid; you have to spread the amount over the period of the loan. If you paid $1,900 in points for a 30 year loan, each year you are only allowed to deduct $63.33, which $1,900 divided by 30. When you pay off your loan, any remaining parts of the points you have not deducted, can then be deducted in full.
If you have any further questions about the tax benefits that come with owning your own house, contact your financial and legal advisors.
If you’d like to own your own home, contact The Sandi Pressley Team to get the process started today.
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