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Ready or not! Tuesday, April 17th is Tax Day.
Homeownership offers great benefits at tax time, and I’ve got tips and a couple of basics to help you understand the interplay between your home and your taxes. DISCLAIMER: I am not a tax or financial planning expert, and you should rely on a qualified financial professional for assistance in matters of this nature.
Is mortgage interest tax deductible?
The interest portion of your mortgage payment (PITI = Principal, Interest, Taxes, Insurance) is tax deductible, meaning you can subtract the interest portion of your mortgage payment for the year from your taxable income. The lower your taxable income, the less you will pay in taxes. #winning
A bonus feature of this tax deduction: If you are new to homeownership, or your particular home loan, the amount of interest you pay on the loan is probably heftier than it will be further down the road, since mortgage loans are front-loaded with higher interest payments. If you have only lived in your home a few years, you’ll hopefully have a nice deduction available.
TIP: Form 1098, your Mortgage Interest Statement, will be provided by your mortgage lender, and gives you the information you need to claim your two most basic (and probably your largest) mortgage-related tax deductions: Mortgage Interest and Property Taxes.
Fast Tax Facts
- Homeowners must itemize deductions using Form 1040 to deduct Mortgage Interest and/or Property Taxes from your taxable income.
- The current standardized deduction amount (non-itemized) for Singles is $6,350, $12,700 for couples.
- Carefully check dates on all tax-related Real Estate forms. Some municipalities issue forms a year behind, but you need to record the actual Property Tax paid for the year you are filing. Be sure to record your 2017 Property Taxes paid on your 2017 tax filing.
- Your escrow account for Property Taxes and your actual Property Taxes paid may differ; file taxes using the actual amount paid, not the amount held in escrow.
- Do you work from home? You can deduct a max of $1,500 ($5/sf for up to 300sf) for your home office.
- Track your home-related expenses. You can lessen the impact of capital gains taxes on the future, profitable sale of your home by subtracting what you’ve spent on repairs and improvements.
Do you need a referral to a tax expert? Maybe you’re wondering whether it’s time to take the plunge on buying your first home, next home, or a home investment?
Let’s schedule a complimentary consultation to discuss your Real Estate needs.