Love your home or Love paying taxes?

28 02 2011

Love paying taxes?  Sure you do, doesn’t everyone?  Most people know that homeownership offers significant tax deductions, but may overlook a few of them as they are preparing their taxes this year.  Here are a few of the most-overlooked home tax deductions.  As always, please consult your qualified tax advisor.

How much of my mortgage interest payment is deductible?

  1. Interest on debt used to buy, build, or improve your home (with some exceptions)
  2. Mortgage Insurance and funding fees for government loans (with some exceptions based on income level)
  3. Property taxes on first and second homes

 I sold my house this year.  Will I owe capital gains tax?

  1. If it was their primary residence for at least 2 of the last 5 years, a married/joint filer could exclude the first $500,000 of profit from paying taxes.
  2. If you made less than the $500,000 profit from the sale, no tax forms are required and no tax is due.
  3. If you sold a vacation home, you may be able to exclude all or some of your gain.

Do I get to deduct money I lost on the sale of my home?

  1. No, but losses on the sale of investment property are deductible.

I bought or refinanced a home this year—which of the closing costs are deductible?

  1. The real estate taxes that you may have paid at closing are deductible.
  2. Prepaid interest is deductible.  You should receive a 1098 from your lender.

Aren’t points deductible?

  1. Yes, based on the following IRS worksheet HERE.
  2. On a purchase, points are deductible on that year’s taxes.
  3. On a refinance, points are prorated over the duration of the loan.  For instance, if you paid $1500 in points on a 15 year refi, you would get to claim  $100 per year.  But if you refi again 2 years later, you could claim the remainder of the original unclaimed points ($1200) plus any applicable prorated points for the new mortgage.

Please consult your tax advisor to see how this information may apply to you.   

Did I forget any other home-related tax deductions?  If so, please share your wisdom with the world below.

Please reach out to me with your questions and concerns about finance and homeownership.  As always, I am here to serve.  Thanks!



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