Home ownership brings with it a sense of pride, accomplishment and responsibility. Being in your own home evokes a sense of peace and comfort. But, beyond these emotional factors, what are the more practical benefits of home ownership that can be realized during tax season?
Mortgage Insurance Tax Deduction
Mortgage insurance (MI) premiums are once again tax deductible. MI premiums paid or accrued on home purchases and refinances made in 2015 and 2016 may qualify for tax deductibility on subsequent federal tax returns.
• Borrowers with adjusted gross income below $100,000 may deduct 100% of their MI premiums.
• Deductions are phased out at 10% increments per additional $1,000 for adjusted gross incomes between $100,000 and $110,000.
Mortgage Interest Deduction
The interest you pay on your mortgage loan is deductible from your federal and state income taxes. The deduction applies to any loan secured by your home, which means that interest on a line of credit, home equity loan, or a loan for a second mortgage or vacation home may also be eligible for the deduction. You do not need to calculate the amount of interest you paid during the year. Your lender will send you a Mortgage Interest Statement (Form 1098), which you will file with your tax return.
Real Estate Taxes
Property taxes paid to state and local governments, either directly or through an escrow account, can be deducted from federal taxes in the year in which you paid them. If you pay your property taxes by escrow through your mortgage lender, your lender will send you an annual statement, which you will file with your federal tax returns. Your state or local taxing authority will also send a statement to reflect the property taxes you paid during the year.
If you are thinking about buying a home or refinancing the one you currently own, contact a loan advisor near you to evaluate your options.