Original article source: Home buying tax deductions
If there is anything in this world that is certain itâ€™s the fact that
everyone likes to save on their taxes when April rolls around. If you
have purchased a home in the last year you are going to want to make
sure that you have remembered all the allowable tax deductions.
When taking out a mortgage to buy a home, there are certain
deductions that the IRS allows that you are going to need to remember.
The list below summarizes the deductions that many people forget about
when buying Real Estate:
Points paid when taking out a mortgage are tax deductible if they are
used to reduce the mortgage interest rate. In the event you donâ€™t know,
a point is 1% of the loan amount. For example on a $200,000 mortgage a
point would equal $2000.00.
Typically most people would not want to pay points on a loan unless
the expectation was to be in the home for a while to recapture the cost
of such points in the form of reduced payments. In order to figure out
if paying points makes sense, you need to calculate the mortgage payment
amount both with and without points.
By looking at the spread between these figures you can determine how
long you would need to be in the home before it would make fiscal sense.
For a complete explanation see when to pay points on a mortgage.
Points or origination fees paid when you buy a home or other Real
Estate are generally tax deductible in full for the year that you pay
It should be made clear that origination charges from the lender that
constitute a â€œservice feeâ€ are not tax deductible. Another method you
could make is to amortize the points over the term of the mortgage. This
choice is usually made only when your itemized deductions are less than
the standard deduction for the year you purchased the home.
Additionally when you refinance a mortgage the points must be
deducted over the term of the loan. If you deduct points over the term
of the loan and sell the home or refinance it again before the loan
expires, you can deduct in the year of the sale or refinancing any
points that you didnâ€™t previously deduct. Keep in mind that you will be
able to get the best mortgage interest rates when you have a great FICO
See how to increase a credit score to help in your efforts to get a terrific interest rate. To continue reading the full article see home buying tax deductions.