Tax deductible - Mortgage tax deductibility

So what exactly is tax deductible when you buy a home and how can I benefit from the tax deductions? This is a very common question, especially among first time home buyers. The main tax deductible item when you purchase a home is your mortgage interest. Every year around tax time, you will receive a form from your mortgage lender detailing out how much money you paid in interest for your mortgage for the previous year. When you do your taxes and itemize your tax deductions at the end of the year, you will be able to deduct the full amount of this mortgage interest. So what if you don't itemize your deductions and you just take the standard deduction? Most likely, even if you have never itemized your deductions, once you own a home, you will start itemizing your deductions to receive the full benefits of owning your own home.

Some of the closing costs that are associated with a refinance are tax deductible. Some can be deducted all at once and others have to be stretched out over the course of the loan. This can help for income tax time and help lower the amount of tax money owed to the IRS or it can help by increasing the amount of money that is coming back to you from the IRS. Consult your tax advisor for specific information as to what is tax deductible and what is not.

For a married couple, you may only deduct the interest on $1.1 Million dollars of mortgage debt each year. That means if you have a $2.2 Million dollar mortgage, your deduction will effectively be reduced to half of the interest paid ($1.1MM is 50% of $2.2MM, therefore deduction limited to interest paid on first $1.1 only). For this reason, the majority of high net worth or super jumbo mortgage customers prefer loans which permit interest to be deferred, allowing them to maximize their deductions and make up for the difference through investment returns and lower long term capital gains tax rates on income therefrom.

Interest paid on your mortgage loan is tax deductible unlike interest on credit card or auto loans. You can lower your interest payments by consolidating non-deductible debt into your mortgage.

Paying discount points to buy down the interest rate can be tax deductible in certain situations since the buy down is just pre-paid interest to he lender. As always review your particular situation with a tax professional.

Property taxes are tax deductible as well if you own a home. Each year, you will receive a statement showing the amount of property taxes you have paid. Give this statement to your tax preparer to maximize your deductions.

» DISCLAIMER: The information contained in this article on 'Tax deductible - Mortgage tax deductibility' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.