Tax Deductions When Buying a House
Hello Hampton
Tax deductions and home ownership go hand in hand. In addition to the many benefits of owning a home, a home owner can expect the following tax deductions when buying a house:
Interest on Your Mortgage
This will be the biggest deduction by far and is applicable on interest paid on your primary residence or second home provided that the home is used as collateral for the mortgage. Also a rental can be considered a second home, provided you live in it either fourteen days out of the year or at least ten percent of the number of days you rent it for, whichever is greater.
This will be the biggest deduction by far and is applicable on interest paid on your primary residence or second home provided that the home is used as collateral for the mortgage. Also a rental can be considered a second home, provided you live in it either fourteen days out of the year or at least ten percent of the number of days you rent it for, whichever is greater.
PMI (Private Mortgage Insurance)
PMI premiums are deductible for mortgages originated between 2007-2010. The amount of the deduction depends on your income and if you make more than $100,000/yr, the deduction starts to phase out.
PMI premiums are deductible for mortgages originated between 2007-2010. The amount of the deduction depends on your income and if you make more than $100,000/yr, the deduction starts to phase out.
Home Equity Debt
You may be able to deduct the interest you pay on a home equity loan or a HELOC (home equity line of credit). The amount of your deduction is the smaller of $100,000.00 or the total of the home’s fair market value.
You may be able to deduct the interest you pay on a home equity loan or a HELOC (home equity line of credit). The amount of your deduction is the smaller of $100,000.00 or the total of the home’s fair market value.
Points
A point is equal to 1% of the loan amount. Points are fully deductible when associated with a home purchase mortgage. Points paid when refinancing are also deductible but they are deductible over the life of the loan and not all at once.
A point is equal to 1% of the loan amount. Points are fully deductible when associated with a home purchase mortgage. Points paid when refinancing are also deductible but they are deductible over the life of the loan and not all at once.
Home Improvement Loan Interest
The interest you pay on a loan used to make substantial home improvements, can be deducted with no dollar limit. However, the work must be a "capital improvement" rather than ordinary repairs. Capital improvements are those that increase your home's value, prolong its life, or adapt it to new uses. Examples of qualifying improvements are adding a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems, and landscaping.
The interest you pay on a loan used to make substantial home improvements, can be deducted with no dollar limit. However, the work must be a "capital improvement" rather than ordinary repairs. Capital improvements are those that increase your home's value, prolong its life, or adapt it to new uses. Examples of qualifying improvements are adding a new roof, fence, swimming pool, garage, porch, built-in appliances, insulation, heating/cooling systems, and landscaping.
Property Taxes
Real estate taxes usually include any state, local or foreign taxes on real property. These taxes are based on the assessed value of the property which can usually be found on the City Assessor’s webpage for each city. You can view the current rates here: Hampton Roads Real Estate Tax Rates. (Please note that after June 30, 2008, the real estate tax rates for Hampton will be reduced to $1.06 per hundred from $1.14 per hundred and the real estate tax rates for Portsmouth will be reduced to $1.21 per hundred from $1.26 per hundred, rates for other cities are expected to remain the same.)
Real estate taxes usually include any state, local or foreign taxes on real property. These taxes are based on the assessed value of the property which can usually be found on the City Assessor’s webpage for each city. You can view the current rates here: Hampton Roads Real Estate Tax Rates. (Please note that after June 30, 2008, the real estate tax rates for Hampton will be reduced to $1.06 per hundred from $1.14 per hundred and the real estate tax rates for Portsmouth will be reduced to $1.21 per hundred from $1.26 per hundred, rates for other cities are expected to remain the same.)
If property is bought or sold during the year, you can only deduct the taxes based on the number of days you actually owned the property. In addition, any taxes held in escrow on your behalf by a bank or other financial institution are deductible in the year you paid the funds.
Mortgage Tax Credit
The mortgage credit certificate (MCC) program allows low-income, first-time homebuyers to benefit from a mortgage interest tax credit of up to 20% of the mortgage interest payments made on a home (the amount of the credit varies by jurisdiction). You must first apply to your state or local government for an actual certificate. This credit is available each year you keep the loan and live in the house purchased with the certificate. The credit is subtracted, dollar for dollar, from the income tax owed. There are income and purchase price guidelines in order to qualify.
The mortgage credit certificate (MCC) program allows low-income, first-time homebuyers to benefit from a mortgage interest tax credit of up to 20% of the mortgage interest payments made on a home (the amount of the credit varies by jurisdiction). You must first apply to your state or local government for an actual certificate. This credit is available each year you keep the loan and live in the house purchased with the certificate. The credit is subtracted, dollar for dollar, from the income tax owed. There are income and purchase price guidelines in order to qualify.
If you have any specific questions about buying or selling your
home, please feel free to contact me directly.___________________
For your real estate needs, visit my website at http://www.hamptonroadsrealestate.us/
For your real estate needs, visit my website at http://www.hamptonroadsrealestate.us/
Comments