It Is Tax Time. Are You Claiming a Mortgage Deduction?
We all know doing your taxes is not fun. Having to pay taxes is downright unpleasant. If you are like me, the only enjoyment I receive from filing taxes is trying to find the tax deductions I’m due. As a mortgage broker, obviously, my favorite is the mortgage interest tax deduction. It not only helps homeowners buy a little more home, but it also encourages others to get into the market.
Here are a few things to keep in mind about the mortgage tax deduction, as we get closer to April 15th:
- The deduction is limited to your individual tax bracket. If you pay 28% in tax, you can write-off 28% of the mortgage interest you paid.
- The amount you can deduct is limited. The deduction is capped at up to $1,000,000 of interest on first or second homes, as well as $100,000 in interest on second mortgages or home equity loans.
- Your property tax is also deductible, falling into the mortgage tax break for homeowners.
- Make sure you look at items that might not show up on your 1098 from your mortgage servicer that may have been on the closing disclosure. Taxes and interest collected at closing may be deductible as are origination and discount points if you paid those.*
The bad news is that mortgage insurance on conforming and non-conforming mortgages, or PMI on FHA mortgages is not tax deductible, but in some cases there are ways around that too (Happy to discuss this further) In addition, other items like your homeowner’s insurance, most home repairs, with the exception of some energy efficient items, and maintenance are not deductible.
*Points paid for purchases and refinances differ. Make sure you consult a tax professional on how to deduct.