It’s tax season which means you’re probably looking for ways to save money on your taxes! As a homeowner there are several deductions that can help ease the pain of what you owe the government, so let’s go over some of them.
If you bought a home or refinanced your home, you’ve spent a lot paying off the mortgage interest. Deduct it! You need to file form 1040 and itemize the deductions, only if they’re greater than the standard deduction. How much you can deduct will depend on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Form 1098 that you got from your lender will explain exactly how much you can deduct and it will serve as proof in case you get audited by the IRS. Another important thing to know about this deduction is that you can get it for your mortgage, second mortgage, line of credit on your home, or home equity loan. To learn the details, click here.
Real Estate Tax Deduction:
It seems odd and is sometimes forgotten but you can actually deduct the local and state property taxes you’ve paid from you federal income tax. You can claim them on form 1040 as an itemized deduction. If you pay these taxes directly, you’ll need to locate the bills and record the amount. If you pay these taxes out of an escrow account, the information you need can be found on form 1090.
Points are essentially prepaid interest on your mortgage, line of credit, or home equity loan. They can also be called loan origination fees, maximum loan discount, loan discount, or discount points. One point is equal to one percent of the loan. Points can actually save you money on your loan over time and you can deduct them from your taxes. How much can you deduct and when? This chart will help you determine whether you can fully deduct your points this year or if you need to deduct it over the life of the loan. For the full run down on how much you can deduct and when click here.
Mortgage Insurance Premium
If you have qualified mortgage insurance, which means it was provided by Veterans Affairs, Federal Housing Administration, Rural Housing Services, or private mortgage insuranceyou can deduct your premium on your taxes. There are of course limits on your deductions based on your income level, this information can be found here and instructions on how to calculate the deduction amount are on form 1040.
We hope these tax tips help you save this year! If you have any other tips for saving on your taxes this season, let us know in the comments!