Common real estate tax right offs!
1. Home acquisition mortgage fees are a write off! If you bought your primary or secondary home this past year, you probably obtained a mortgage to finance the purchase. That mortgage is called an “acquisition mortgage” because it enabled purchase of the residence. If you paid a loan fee to obtain that acquisition mortgage, usually called “points,” that loan fee qualifies as an itemized interest deduction. Each point paid equals 1% of the amount borrowed.
2. Home improvement fees are a write off! Similarly, if you paid a loan fee to obtain a home improvement loan, that loan fee is fully deductible in the tax year it was paid.
3. Loan fees paid to refinance a home loan (or borrow against other real estate) is a write off! If you refinanced your existing home loan this past year, or borrowed against other real estate such as an apartment building, any loan fee you paid must be deducted over the life of the mortgage.
4. When refinancing, deduct any loan fees that have not already been claimed! Thanks to continued low mortgage interest rates, many homeowners refinanced again the last year, or borrowed against other real estate such as an apartment building. Any loan fee you paid must be deducted over the life of the mortgage.
5. If you bought or sold property in the last year remember to deduct prorated real estate taxes! A major write off many real estate buyers and seller overlook is the prorated property tax they paid ay close of escrow. Even if the other party remitted the payment to the tax collector, but you were charged a prorated portion of the tax bill, be sure to deduct your share on your return this year.
6. Deduct prorated mortgage interest in the year of property purchase or sale! Similarly, if you bought a residence and took over an existing mortgage, don’t forget to deduct your prorated interest share for the month of the sale. Your closing settlement statement shows your prorated share of the mortgage.
7. Mortgage prepayment penalties are a write off! If you paid off an existing mortgage early and were charged a prepayment penalty by the lender, that prepayment penalty is qualified as an itemized deduction.
8. When land rent payment qualifies as interest deductions! Millions of homes are located on leased land. Internal Revenue Code 163 allows land rent to be deducted like interest when the lease; (a) is for at least 15 years, including renewal periods; (b) is freely assignable; (c) contains a present or future option to buy the land; and (d) is likely a security interest such as a mortgage. Payments to rent the land are not deductible if you do not have the option to buy the land, such as a mobile home park.
9. Home construction loan interest is a write off! If you built a new home in the past year, or are building one now, don’t forget to deduct the construction loan interest paid. It’s deductible if the construction period does not exceed 24 months before occupancy of your principal residence.
10. Deduct prepaid property taxes and mortgage interest! If you prepaid next years real estate taxes this year as homeowners do to increase their tax deductions, or if you pay your January payment in December, don’t forget to deduct these extra mortgage interest and property tax payments on this years income tax returns.
Rules and regulations concerning the IRS and authorized deductions should be independenttly verified for the year in which you are claiming those deductions.
This is great information!