If you are a homeowner then you can easily claim a few sizeable deductions in the upcoming tax season. Some of these deductions include property taxes, mortgage interest, and mortgage insurance premiums. You can take these deductions if you have a home mortgage.
Individually, these deductions might appear small but if you look at them together, they add up to hundreds of dollars in savings as well as on your tax bill.
To help you make the most of your tax deduction, related to your real estate, Dr. Phillips Realtors suggest what you can and cannot count as the real estate deduction in terms of taxes.
Real Estate Tax Deductions to Look Out For
Here are your real estate tax deductions that you must not miss out.
One perk of homeownership is to write off the annual property taxes. You can deduct these taxes in the same year they are paid and not the one in which they were due. At the beginning of each year, the property assessor’s office in your county sends out a simple statement, showing the total amount of property taxes. You should also know that if you buy a house and reimburse the seller for property taxes, they have already paid; this will be reflected in the statement of settlement and not in 1098.
If you are among the lucky ones who bought a house in the year 2015, you have got another deduction that must be included on your tax bill i.e. mortgage points – Ocoee Realtors suggest.
Most of the borrowers make payment for points that may come in two forms. One is discount points that enable you to prepay a portion of your loan interest. This serves as an exchange to get better mortgage rates. Second is the loan origination fee. However, one point is equivalent to 1% of the loan amount and most of the homeowners completely overlook this basic deduction as the Clermont Florida Realtors suggest.
Just like personal loans, mortgages are designed in a way that huge chunk of your payment, made in the first couple of years of owning a house, goes toward interest payment and only a little amount goes towards the payment of principal.
The good part is you can easily deduct these interest payments on the primary or often second residence. But many homeowners take this as the largest deduction, each year, on their tax bill. They key is to itemize the deductions in more meticulous detail to take the best advantage of mortgage interest.
Mortgage Insurance Premium
In case the down payment of your home was less than 20%, you must be paying a mortgage insurance premium. The IRS takes this mortgage premium insurance payment as a deductible amount as mortgage interest. But you cannot deduct the mortgage insurance premium in case your adjusted gross income is higher than $109,000. Or if you are filing separately as a married couple it should be $54,500 or more.
So if you need to buy a house and want more professional insight, contact Megan Dowdy Realty right away.