Tax Info

Home ownership usually offers tax benefits in the form of itemized deductions from your income tax. In order to get these benefits, you must file Schedule A, Itemized Deductions, of IRS Form 1040.

What exactly, can you deduct? You can deduct the interest paid on a home loan, property taxes, and points paid on a home mortgage loan.

Interest paid on home loans. Generally, you may deduct interest paid on a first mortgage, second mortgage, home improvement loan, and home equity loan. You may deduct interest on two residences, for example your home and a vacation home. Your lender(s) will send you an annual form 1098 Interest Statement to use in preparing your tax return. The IRS imposes limits on the amount of debt you can have for tax deduction purposes.

Property taxes. Local governments impose property or real estate taxes based on the assessed value of your real estate. The monies are used to help pay for public services. You can expect to pay between 1 and 3% of the assessed value of you home in annual property taxes. Therefore, for a home assessed at $250,000, the property taxes will likely be between $2,500 and $7,500. Property taxes assessed on all real property, not just residences, are tax deductible.

Points. Points paid a lender to lower your mortgage interest rate on a principle residence are usually deductible in the year paid. If you pay points to refinance a residential mortgage, they will be deductible over the life of the loan.

You can download PDF files containing detailed information on tax advantages of home ownership from the IRS Web site. The IRS updates these documents each tax year.

We think the following might be of interest:

Publication 523 Selling Your Home http://www.irs.gov/pub/irs-pdf/p523.pdf

Publication 527 Residential Rental Property http://www.irs.gov/pub/irs-pdf/p527.pdf

Publication 530 Tax Information for First-Time Home Owners http://www.irs.gov/pub/irs-pdf/p530.pdf

Publication 535 Business Expenses http://www.irs.gov/pub/irs-pdf/p535.pdf

Publication 936 Home Mortgage Interest Deduction http://www.irs.gov/pub/irs-pdf/p936.pdf

Bridgeview Mortgage Company recommends that you ask your tax advisor to assess your situation.