As difficult as your house payments may be to make each month, they really pay off during tax season.
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Reap the Benefits of Your Mortgage During Tax Season
As difficult as your house payments may be to make each month, they really pay off during tax season. There are quite a few deductions you can take advantage of if you are paying on a mortgage. Taking advantage of those deductions can help make your tax burden much lighter and may even put some money in the bank for you. We have some great tips for you to use during income tax time if you own your own home.
The most common and widely used deduction used by homeowners at tax time is the mortgage interest on their main residence. Schedule A can be used by homeowners who itemize their deductions to claim the entire amount of interest they paid as long as their mortgage balances do not exceed $1,000,000.00. This entire interest amount can only be used for your main residence, not other residences you own that you rent out or live in part of the year.
City and/or local taxes paid on your real estate and other properties can be filed on your tax deductions each year. If your taxes are figured into your mortgage payments, you can still use them if you will take the time to figure out what portion of your payment went for taxes. Your local tax authority should send you a yearly notice of what your taxes are whether you pay them directly or through an escrow fund.
If you have borrowed money against your home in order to renovate or improve your home, you can probably use all or part of the interest of that loan on your deductions. There could be some limitations on the amount you can deduct, depending on the value of your property. Check the IRS tax booklet for instructions on how to determine this amount.
If you re-financed your home in the previous year, you likely paid points that can be used on your tax deductions. You do have to figure out how many you can use, though, and can do this by dividing the amount by the number of years used to finance the mortgage. If you bought your home in the previous year, then you may be eligible to use the entire amount, depending on several factors. Be sure to consult the tax booklet or a professional tax accountant to determine the amount you can deduct.
One of the best advantages of buying a home is all of the deductions you become eligible for at tax time. Make sure you take every deduction you are allowed in order to enjoy all of the benefits owed to you. The money you gain from doing this can greatly offset all of the expenses you incurred during the year as a result of owning your own home.
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