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 Chances are, one of the
reasons you purchased a home was to take advantage of one of the few tax
breaks still left. Since the government implemented these tax breaks 75
years ago, more and more people have taken the plunge of owning their own
home. The only stipulation is that you must itemize your taxes in order to
get the deductions.Interest The most well known deduction is mortgage interest. This is true whether you pay a traditional mortgage lender or the seller of the property. You can use this deduction as long as the debt is secured by real property. In addition, you can also deduct up to $100,000 in interest on home equity loans. That’s why you see so many people taking advantage of their home equity to pay off other debts. Your credit card and personal loan interest are not deductible, but your home equity loan interest is. Property Taxes All property taxes that you pay each year, whether through an escrow account set up with your lender, or on your own, are tax deductible. The only gray area is special government fees such as water and sewer. |
Check with your accountant on the deductibility of these fees. Closing Costs Each time you buy a home, and each time you sell a home, you have closing costs. The majority of these are tax deductible. It’s important to check with your accountant as to which fees are deductible and which fees are not deductible. Loan Points If you paid points on your mortgage loan, you may deduct the amount you paid on your taxes provided you do so in the year that you paid them. If you recently refinanced and paid points, then you are only able to write off those points a little each year. Check with your accountant for your specific situation. There are other costs that cannot be deducted. These include homeowner’s association fees, condo association fees or co-op fees. You’re also unable to deduct your insurance fees on the property. If you’re looking for a professional tax person, please contact me and I would be happy to refer you to one. |
