Homeownership comes with a lot of advantages, especially when it comes to tax time. Make sure you're not missing out on important home-related tax deductions. Here are some things you may be able to deduct:
1. Deducting Mortgage Interest- The interest you pay on a home mortgage is usually tax-deductible. Every year, you should receive a "Form 1098" from your lender which details how much mortgage interest you paid. Home mortgage interest deductions can also include late payment charges and pre-payment penalties.
2. Deducting Real Estate Taxes - Real estate taxes are also tax-deductible. Your interest statement should list the amount of real estate taxes you paid if your taxes and homeowners insurance were placed in an escrow account when you closed on your mortgage. If your real estate taxes aren't included on the statement, review your cancelled checks to figure out the total amount of real estate taxes paid.
3. Deducting Mortgage Discount Points Paid on a Purchase - The points you pay on a loan for a home purchase are tax-deductible for the year you made the purchase. You can deduct the points you paid as well as those a seller paid on your behalf if you meet the criteria.
4. Deducting Seller Concessions - Sometimes, the seller will contribute money to the buyer to help cover the buyer's loan closing costs. The average concession is 3% of the sales price.
5. Deducting Loan Points Paid on a Refinance - If you refinanced in the last year, you may be able to deduct any points you paid to buy down the mortgage rate. If you have refinanced more than once, you may be able to deduct unclaimed points from an earlier refinance.
6. Deducting Interest on a Home Equity Loan - Interest paid on a home equity loan or line of credit may be tax-deductible. However, the deduction may be limited if the combined amount of your second and first mortgages total more than the property's actual value.
As always, please consult your tax advisor to find out which deductions apply to you.
Happy tax returns!!
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