Tax Deductions to Remember When Getting a Home Loan

Real Estate Agent with RE/MAX Executive Realty 91362

When borrowing money to buy a home, there are certain deductions that you are afforded by the ole tax man that you should be aware of come tax time in April. The following are some of the deductions you may forget about when buying a home:

POINTS ~ Points on a home loan are tax deductable if they are used to bring down the mortgage interest rate. For those that don't know a point is 1% of the loan amount. On a $200,000 mortgage a point would equal $2000.00. You would only want to pay points on a loan if you knew your were going to be in the home for a while.

In order to understand if paying points makes sense you need to calculate the mortgage payment amount with and without points. By looking at the spread between those amounts you can determine how long you would need to be in the house before it would pay off for you.

Getting back to points, origination charges that constitute a "service fee" are not tax deductible.


When you are buying a home depending on when in the month the home sale closes, the buyers pay either a small or large amount of pro-rated mortgage interest for the month in which they close. Whether it's large or small, a home buyer can write that amount off. The Final Closing/Settlement Statement will show just how much the buyer is due.

PRO RATED REAL ESTATE TAXES                                                                                                                                            

Often times a seller will send the local tax collector's office a check for Real Estate taxes prior to the closing. In many circumstances, however, the buyer pays a pro-rated portion of the taxes for the year at closing. This is one that is often forgotten.


As long as the construction period doesn't last more than two years before you make the new home your "principal residence," you can write off the interest for that new construction loan.


Although most home loans today do not have pre-payment penalties on rare occasions you will still find one. If your loan does have a pre-payment penalty and you do pay off the loan early, these penalties are tax deductable.




The above information on tax deductions to remember when getting a home loan was provided by Bill RE/MAX Executive Realty Hopkinton MAGassett, the team leader for the #4 RE/MAX Team in Massachusetts in 2007. Bill can be reached via email at or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 22+ Years. Bill's office is conveniently located in the center of Hopkinton MA at 77 Main Street.

I have a passion for Real Estate and love to share my marketing expertise! I would welcome the opportunity to earn your business.

For Metrowest Massachusetts Real Estate and homes see Metrowest Mass Home Sales. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.

I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.

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Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys providing helpful information to buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and others.


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Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Bill - thanks for the reminders! Gee, I knew all that stuff back when I was super busy...I used to ask the Sellers to pay closing costs that were not tax deductible and let the Buyer pay the ones they could deduct - points come to mind.

Nov 17, 2008 06:35 AM #65
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Renee that is interesting. I did not know that.

Sharon - Your welcome. There are many 1st time buyers who have no clue that these items can be deducted from their taxes.

Nov 17, 2008 08:43 AM #66
Tina Merritt
Nest Realty - Blacksburg, VA
Virginia Real Estate

Bill - what an educational post for buyers and a reminder for us (especially those of us who still need to file 2007!)

Tina in Virginia

Nov 18, 2008 12:38 AM #67
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Thanks Tina I appreciate the compliment:) There are always deduction that people forget about.

Nov 18, 2008 08:52 AM #68
James Wexler - Scottsdale, AZ

bill  - great outline of the IRS secrets that make the difference so often when deciding to buy versus rent, really tips the scales, thanks

Nov 19, 2008 01:27 AM #69
Jason & Amber Gardner
Hasson Company, Realtors - Sherwood, OR
We're Committed to Your Success!

Great info... This should be a re-blog!

Nov 19, 2008 05:14 AM #70
Ann Hayden 636-399-7544
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Chesterfield, MO


Congrats on the gold star and thanks again for the great post!


Nov 19, 2008 11:57 AM #71
Mara Hawks
First Realty Auburn - Auburn, AL
Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL

When it comes to taxes, we can never have enough clarification, and you (of course) do an excellent job here, especially helpful for BUYERS... Great job---and well done GOLD STAR!!

Nov 20, 2008 01:30 PM #72
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

These are deductions that many consumers are not aware of.  It is important information to put out there for them so they can benefit from them.

Nov 20, 2008 05:04 PM #73
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This is important for the consumer to remember.  Often they do not look at the tax benefits when they are determining whether or not it is a good time to buy!  I also discusse the new tax credit (which is repaid over time) - as another reason to think about buying vs. renting!  Very nice post, Bill. 

Nov 21, 2008 02:59 PM #75
Marlene Pellegrini
Norwich, CT


This really is good info.  Easy to understand too.  I would have re-blogged it if allowed!

Nov 22, 2008 09:42 AM #76
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Did not know that about prepayment penalites!  Great info!

Nov 22, 2008 10:42 AM #77
Mesa, Arizona Real Estate Mesa Arizona Realtor
Homes Arizona Real Estate LLC - Mesa, AZ

Bill, this is good stuff! I've heard it suggested by some that we send out the Hud-1 settlement statement to each of our buyers the first of January and explain the foregoing deductions. By the way? I tagged you for a Book MeMe...yeah, I know, but someone tagged me first. ;-)


Nov 22, 2008 12:46 PM #78
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Thanks everyone for commenting on "the tax deductions to remember when getting a home loan"!

Nov 23, 2008 12:17 AM #79
Tim Ludemann
Ochopee, FL


Great tips and ideas to get new buyers closed...thanks

Nov 24, 2008 02:51 AM #81
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Tim - Thanks I appreciate the compliments.

Nov 24, 2008 06:46 AM #82
Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA


Also time to get those HUD's ready to mail and email to this years sales.

Nov 24, 2008 10:49 AM #83
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

I know I read this before, but I don't see a previous comment from me.  Hmmm.  Well, it's definately worth a comment!  This is a great list, and one that any homeowner can use - especially first-timers!

Nov 25, 2008 12:32 AM #84
Edward moloney
Edward Moloney Loan Officer GMH Mortgage Services - Holliston, MA
Loan Officer Providing 5 STAR SERVICE


Great post. I agree many forget about the prorated taxes that they pay at closing and often this is missed by many since they will often not get a tax form for this is why we always provide all our clients in Jan a copy of their hud and remind them to give it to their tax accountant.

I also agree that people do not always get the straight correct opinion on paying points. The reality is that the mortgage professional should provide a break even analysis. Also tell the client that they should discuss the overall decision with their tax professional since some of the decision should be based on tax planning. The reality in a very volatile interest rate market in most cases paying points does NOT make the best sense. Again in a market where rates are flat for 6 months or more then in makes more sense. In todays market where in a 90 day time period rates can vary over 1 full point in rate 5.375 to 6.75 over the last 90 days or so it is volatile and does not make sense to pay a point to lower the rate in my opinion.

The comments on PMI are very important but also must be reviewed with a true tax profession since the income of the family will effect the ability of the PMI being tax deductible.

This is why I have stated for sometime that we all should have GREAT tax people that we work with and can refer to our clients.

Thanks again for your value and info

Nov 29, 2008 10:35 AM #85
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Ed - Thanks for taking the time to comment in such detail. There is no question that having a good account is important. A skilled accountant can certainly save you a few bucks at tax time. Of course having a good mortgage officer and Realtor makes a good package deal as well:)

Nov 30, 2008 02:22 AM #86
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