It's the time of year when many people start planning to file their taxes.
As you start to get your paperwork organized, remember to double check the tax tips below from www.MortgageLoan.com.
2012 Mortgage Tax Planning Tips:
Paperwork to look for from your lender:
1. Whether you've done a mortgage refinance, or taken a second mortgage, your lender should send you a Form 1098 annually, which includes the amount of mortgage interest that you paid during the year. In most cases, that amount is tax-deductible.
2. You should also receive an annual escrow statement, indicating how much of your mortgage payments were used to cover expenses like homeowner's insurance and real estate taxes. Interest and taxes paid through your mortgage can add up to substantial tax savings.
More Deductions:
1. If you have a second mortgage on your property, such as a home equity loan or a home equity line of credit (HELOC), much of the interest paid on those loans can be deductible. Every dollar used to finance home improvement projects up to $100,000 may reduce your taxable income dollar for dollar.
2. If you purchased a home in 2011, any points paid by your seller and lender may likely be deductible for that calendar year. If you paid points on your refinance then you may be able to take the points as a tax deduction but will have to write those off for the term of the mortgage.
You’ll need to divide your point deductions by the length of your mortgage term in years. For example, a borrower with a 20-year mortgage loan gets to deduct 1/20 of the paid points every year, until the loan is paid off or refinanced.
Refinancing Tax Breaks:
1. Refinancing a loan with prepaid points presents a tax break that many homeowners don't know about. When you refinance mortgage, you may deduct the entire balance of the remaining points, and start counting years anew based on the points included in your refinanced loan. If you refinance a 30-year mortgage after four years, that's 26 years' worth of points deductions you can take all at once.
Also, if you have refinanced again due to the historically low rates, there may be an opportunity for you to "catch-up" on the deduction you made on first refinance.
Of course, when considering any of these strategies you'll want to consult with your tax professional. If in the event you don’t have a tax professional to rely on, please contact me for a recommendation.
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