Benefits of Homeownership at Tax Time
It's tax time ...
And that means it's time for you to gather all of those envelopes recently mailed to your home marked "Tax Documents Enclosed" and file your taxes for the year.
If you became a new homeowner during the previous year ...
Your real estate professional and lender probably told you at the time of purchase that homeownership comes with tax benefits. Well, now's the time to flex those tax benefit muscles.
If you closed your loan via my mortgage services during the previous year, you should have received a copy/CD of your Mortgage Closing Disclosure at the end of January. Much of the information you'll need to prepare your taxes and maximize your tax benefits is available on that Disclosure.
Whether preparing and filing your own tax returns ... or paying to have them prepared for you by a professional tax preparer, it's wise to fully-educate yourself to the tax deductions available to you before you start. That's especially true when you're a homeowner.
Please Note here: I am a Mortgage Originator, not an accountant or professional tax preparer. The information I provide below is to be used only as an alert and source of reference for mortgage-holding homeowners ... not construed as professional advice.
Should you have questions or be in need of tax and filing advice, please seek the services of a licensed/registered tax preparer. (If in need of a referral for a tax professional in the Will County - Chicago Southland area, please contact me. I'll be happy to provide a referral to a qualified tax professional.)
That said, if you're a new or mortgage-holding homeowner ...
What are some of the tax deductions you may be entitled to?
- Property Taxes: City or State property taxes should be deductible.
If a new homeowner: Consult with a Tax Adviser as to the ability to deduct any Prorated Real Estate taxes from the date of your Closing on.(Understanding that a Homeowners pays Real Estate Taxes in arrears for the previous Calendar year in the Chicagoland Area and Collar Counties.) If taxes were paid at that time, the dollar amount should be noted on your Disclosure Statement.
- Mortgage Interest paid during the year: You should have received a form (Form 1098) or something similar from your mortgage holder. The Form will typically break down the monies paid during the year, any deductible points paid (including those seller-paid), and if/when paid, mortgage insurance premiums.
If the home is a Second Home or Investment Property:
Mortgage Interest can still be deducted, within guideline limits.
- If the Mortgage closed was a Refinance: You can still claim the interest as a deduction, but you will have to meet certain criteria to do it. That criteria may include spreading the deduction out over a defined number of years or over the life of the loan.
The Points paid during your Refinance may also come into play, but prorations will be figured and utilized for tax deductions.
- Points paid at the time of Closing: These points could take the form of Discount Points or Origination Points. They also can include those Points paid for you by your Seller at the time of your Closing.
- Mortgage Insurance Premiums: (For those policies issued after 2006)
Mortgage Insurance Premiums that qualify include those provided by the:
- The Internal Revenue Service (IRS) allows First-Time Home Buyers (if married, both spouses) to make penalty-free withdrawals from their traditional IRA (or Roth IRA) up to $10,000/each.
The IRS also allows their parent, a child, or grandchild to contribute ... with the total contribution allowed being $20,000.
- Moving Fees: Deductions may be allowed for some moving fees ... if the move was facilitated by a change of employment or new job position. Specific IRS requirements must be met in order to use this deduction. (Please inquire with your tax preparer as to these requirements or see IRS Publication 521 regarding Moving Expenses)
- Transfer Taxes: Transfer Taxes, if paid, can be written off.
Again: The information above is meant to be used only as a tool and to alert you to deductions and possible monetary savings you may be allowed. Hopefully, it also assists you in your own tax research or serves as a roadmap when asking questions of your tax professional.
Bottomline, the good news is this: If you're thinking of buying a home soon or in the future, there are savings (tax and otherwise) to be found when you buy, finance, and own a home.
The first step to discovering the possibilities that exist for you when buying or refinancing in the Will County, Chicagoland, IL (and WI) area? Contact me ... or your own local Lender. I'll be happy to answer all your questions and assist you with your financing needs.
And please don't forget: The deadline for filing 2016 Federal Income Tax Returns is April 18th, 2017 ...
Read: How Your Tax Refund can Help You Become a Chicagoland Home Buyer
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