Answers to more questions. I am sure I may have missed a few points (no pun intended). Please share your tax strategies. I wrotye this to answer some clients questions a couple of years ago.

And away we go... 

Before we get started, please consult with your tax advisor before acting on any of the items I am about to present to you. The purpose of this entry is to give you questions to ask when going to your tax planner or preparer. As I have stated in the past, when you are a homeowner or business owner, you should consider having a professional prepare your taxes with your input. They are more up to date on basic tax laws and many of the changes that go into effect each year. Take notes of the things you do with your home throughout the year. Some things may give you deductions you were not aware of. I practice what I preach. I have my CPA (Certified Public Accountant) prepare my tax return each year. I take a couple of hours reviewing my year and the receipts that I keep and then I spend an hour with Mark and Henry reviewing my numbers to ensure that I get what I am entitled to and that I pay what I am supposed to pay. Enough of that, we are here to help you today.

Here are the things that are tax deductible in the Mortgage Loan Process.

1. Home Purchase Mortgage Loan Fees. If you bought your primary or secondary home in 2004, you probably used a mortgage to complete the purchase. If you had cash...good for you, stop reading this and find another blog. If you paid a loan fee to obtain the mortgage you can deduct this fee. These fees are usually called points and they can count as an itemized interest deduction. Each point is equivalent to one percent of the loan amount borrowed.

2. Home Improvement Loan Fees. This is a similar deduction to the points in an acquisition mortgage.

3. Refinance Loan Fees. If you paid loan fees to refinance your home these fees are deductible, though not the same as for an acquisition loan. If you paid a point to refinance your home, you can deduct the point you paid over the life of the loan. If you paid  one point on a 30 year loan, you can deduct 1/30th of the point each year. If you sell the home or refinance it again, you can deduct the remaining amount of points in the year of sale or refinance.

4. Real Estate Taxes: Make sure you deduct prorated real estate taxes. Many buyers and seller forget to deduct the prorated taxes they paid at the closing. When you go to have your taxes prepared make sure you bring the closing statement (HUD-1) to your tax preparer. A paper trail is important to help them calculate the amount you can deduct and is the best way to prove that you are eligible for the deduction in the event you are ever audited.

5. Prorated Interest in the Year of Purchase: This is the prepaid interest that is listed on the HUD-1. This is the per diem interest form the day you close until the first payment date. It is often over overlooked.

6. Mortgage Prepayment Penalty: If you paid a prepayment penalty to your mortgage company when you sold your property or refinance a higher rate loan, you can deduct the amount of the prepayment penalty as an itemized deduction.

7. Home Construction Loan Interest: If you completed the construction of a new home in the past year or are building a new home and using a construction loans, make sure that you deduct the interest payments you made. They are deductible if the construction period does not exceed 24 months before you occupy the property as your principal residence.

There are many available deductions when it comes to your home mortgage. Make sure you keep all records of expenditures and review them with your tax preparer. What works for one may not work for the other. Each situation is unique.

If you would like to be introduced to a qualified tax preparer or have questions for me, please contact me at KlassenMortgage@hvc.rr.com. I'll be happy to ask other qualified people to answer your questions.