The 3 deductions in your monthly payment
The monthly house payment that you make offers many opportunities for income tax savings according to our expert Minneapolis gay realtor ~ it could be property taxes, mortgage interest, mortgage insurance, closing costs and more!
1. Mortgage interest can be deductible only if you itemize it on a Schedule A. To be deductible, any loan must be secured by a primary residence or a second home. (You can deduct other items and interest for rental property within the Schedule E.) The loan can be a first mortgage, a home equity loan, a home improvement loan or a home equity line of credit. Your deduction however is limited to interest on the first 1 million USD ($500,000 for married-separate filers) of money on a loan to build, buy or renovate your house.
2. Property taxes are usually deductible for primary and second homes, this is only if you itemize ~ if the tax is owed and paid, it makes it deductible.
3. Mortgage insurance, whether it’s called MIP (mortgage insurance premium), PMI (private mortgage insurance), a funding fee (for VA or USDA mortgages), or MI (mortgage insurance), it is deductible; though, you must itemize your adjusted gross income (AGI) and deductions shouldn’t exceed $100,000.00 (half that for married-filing-separately) in order to make a full claim of your deduction.
Deductible closing costs
If you happened to have bought a home in 2012 or refinanced the mortgage, then you had to pay some closing costs, some were actually deductible, for example:
Points, which come in two forms; They could be prepaid interest known as discount points or origination charges also known as loan fees. After purchasing a home, the origination charges are deductible fully within the same year that you make payments, over the term of your loan; discount points are pro-rated.
If you refinance a home, the entire points must be pro-rated; nevertheless, if there are un-deducted points still from an old loan, you are able to deduct them all entirely in the year that you repay.
There are numerous chances out there for homeowners to minimize their taxation burdens and you too should take advantage of them while you can.
The information provided is not legal or tax advice ~ please check with your CPA or tax attorney to verify the tips provided above will apply to your personal situation.
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