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It's that time of year again: get ready to gather up the paperwork and settle in to get your tax forms completed. Whether you use a commercial software, stick it out on your own, or hire a professional, there are some documents you'll need to be sure you have to hand when you're maximizing the write-offs you can get by having a home mortgage. Staying Organized Hopefully you've been keeping all your paperwork organized throughout the year. If you haven't there is no better time than right now to start: Set up folders in your file drawers for 2013 and start putting the papers where they belong! When it comes to your home, you'll want to hang on to your mortgage bills and your year-end mortgage statement; any receipts for home improvements that increased the energy efficiency of your home; and any receipts for upgraded and energy-efficient appliances you have purchased. These documents are extremely important because itemizing your taxes is going to be the best way to maximize your deductions. Mortgage Interest and Insurance In general, the interest you pay on your home loan, whether it is a standard loan, a line of credit, or a construction loan, is tax deductible. Many people have refinanced recently and may be eligible to deduct the interest associated with the refinance as well. Specific restrictions do apply to the amount you can deduct and the types and numbers of properties that are eligible. In general you may deduct interest on your primary home and on one additional residential property. You may also be restricted by the type of loan you have; a home equity line of credit has different limits than a straightforward mortgage. At the end of the year you'll receive a Form 1098 from your lender which will clearly show your payments for the year and simplify taking the deduction on your tax forms. If you are a fairly new homeowner or if your home is underwater and your loan-to-value ratio is 80% or greater, you will have private mortgage insurance on your home. These payments are also tax deductible, depending on your adjusted gross income. As your AGI increases, the amount you can deduct decreases. Energy Efficiency Deductions According to the Energy Star website, you can get a tax credit of either 10% or 30% of the cost of a number of home energy efficiency improvements. These include:
Check the website
carefully as some credits apply only to primary homes, while others may be
used on secondary homes as well, and some apply only to existing homes and
not new construction. You must be certain to save your receipts and the
Manufacturer's Certification Statement for your records.
Points, Taxes, and Other Deductions Points are fees you pay when securing your mortgage. They will be clearly stated on your HUD-1 closing statement and on your end-of-year Form 1098. Points are deducted differently for first-time loans versus refinance loans so if you're doing your taxes on your own you'll need to read the instructions carefully. If you bought or sold a property in the past year, a portion of the real estate taxes you paid are eligible for deduction. State and local property taxes are generally eligible as well. If you own investment properties, numerous breaks may be available to you, for things such as the property's mortgage, costs of repairs and maintenance, and depreciation. Consult a tax advisor for more information. Real Estate: A Great Investment Despite the recent ups and downs in the market, owning a home is still a great investment and can give you substantial breaks when it comes to your taxes. If you have further questions about mortgages or home ownership, I'm happy to sit down with you for a no-cost and no-obligation discussion about advantages and options. Call me today to learn more! * We are not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations. |
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