Your real estate agent may have mentioned the tax benefits of home ownership over renting. They are real, but you have to keep records if you want to take advantage of them.
That means, upon closing you should make a copy of your closing statement and put it with your other tax information before storing those loan documents.
This document will show the following expenses, which are deductible in the year of purchase:
- Points, which could include origination fees
- Pre-paid interest
- Pre-paid property taxes
After year’s end you’ll get a mortgage interest statement from the bank. Both of these documents need to go to your tax accountant.
If taxes and insurance are being paid through an escrow account managed by the bank, you may also need to supply a separate print-out showing how much the bank paid in property taxes from your escrow account.
Your tax accountant will use these documents to determine your homeowner-related deductions for the year.
Depending upon your income level and the amount of mortgage interest you’re paying, these deductions can bring you over the standard deduction and reduce your tax liability. (For this year, the standard deduction is $12,400 for married couples filing jointly and $6,200 for single filers.)
Since this expense is combined with other expenses such as medical care and work-related expense, you could save a significant amount.
If you have a home-based business…
If you operate a business from home or have a home office, it pays to keep records and deduct the expense from your business income. This not only reduces the amount you’ll pay in Federal Income Tax – it also reduces the amount you’ll pay in Social Security and Medicare.
What’s deductible? That portion of your home utilities you use for business, improvements made to your work space, and a percentage of your mortgage interest, taxes, and insurance.
To determine the business portion, you must measure the square footage of the area used exclusively for business and divide it by the total square footage of your home. That will give you a percentage.
Note: You won’t be able to take this deduction if you only have a desk in a room that is primarily used for family living, so it does pay to set up an otherwise unused room as an office.
For full details, read IRS Publication 587 (http://www.irs.gov/publications/p587/index.html) – Business use of your home.
For maximum savings this year, discuss the issue with your tax accountant ahead of time and then be diligent in keeping records per his or her instructions.
You’d rather not spend it than get to deduct it…
So when you’re ready to save money on taxes by becoming a homeowner, call on the Mike Clover Group. Remember, we offer the lowest interest rates combined with the lowest fees – and we’ll close your loan within 30 days.
The first step is to become pre-approved for your mortgage loan, and we’ll be happy to do that for you. Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com.
And remember, we’re now serving clients in both Texas and Washington State.
18170 Dallas Parkway
Dallas, TX 75287