Tax time – a(nother) great time to be a homeowner.
If you’re thinking that 2016 may be the year for you to become a homeowner or make a move, we agree! So sharpen your pencil, talk to your accountant, get to house hunting and start enjoying the tax benefits on your 2016 return.
Mortgage Interest Deduction
For most homeowners, the bulk of your mortgage payment, at least for the first few years, goes to interest. And under current tax laws, mortgage interest paid is deductible, unless your loan is more than $1 million.
Mortgage interest on a second home is also usually fully deductible. Just consult current tax laws to make sure the IRS can’t consider the place a residential rental property and nix the deduction.
Interest tax breaks don’t end with your home’s first mortgage. If you pull out extra cash through refinancing or get a home equity loan, you could have another interest deduction, so make sure your tax preparer has all pertinent information on those types of home transactions.
If you pay points to get a better rate on a mortgage loan, you may get a tax break. Huddle up with your loan officer and accountant to make sure your loan meets all the qualifications required to deduct points all at once.
If, as a homeowner you pay points on a refinanced loan, you may also be eligible for a tax deduction, but in most cases the points must be deducted over the life of the loan, so it’s not a lot to get excited about. Still, a deduction is a deduction.
The tax code provides other advantages for people who own their homes. In addition to mortgage interest, you may be able to deduct property tax payments and mortgage insurance paid, as well as additional itemized expenses.
Also, homeowners may exclude, up to a limit, the capital gain realized from the sale of a home, unlike other investments typically taxed at 15% or more. Which means, if you’ve been thinking about downsizing or moving to a less expensive home, 2016 could be your year. When you do your taxes, get your preparer to show you a couple different scenarios should you decide to make the move.
Whether you’re a first time homeowner or making a change, we can help. Get started at TheShannonLawrenceTeam.com!