Purchase Costs Deduction
In most cases, you can deduct loan discount points, origination fees, and daily interest paid on the mortgage at closing — even if you’re not the one who paid for them. Your closing disclosure (also called a CD) has all this information, so hang onto it to use when preparing your return.
Are you married filing jointly and purchasing your first or second home? Beginning in tax year 2018, couples filing jointly can deduct the interest on up to $750,000 of qualified residence loans. Couples filing separately can deduct interest on up to $375,000 of qualified debt. The amount decreased from $1 million ($500,000 for couples filing separately) under the Tax Cuts and Jobs Act.
Does your business require that you use a home office? You might be able to deduct a percentage of your home costs related to that portion of the property. This one can be a bit tricky, so be sure to consult with a tax professional.
Within certain IRS limits, the interest you pay on a home equity loan or a line of credit may also be deductible.
The premiums you pay for mortgage insurance may be deductible up to a certain income limit.
If you take out a loan for home improvement, you can deduct the interest with no dollar limit. This is only for “capital improvement” — not just ordinary repairs. A tax professional can give you more information about what improvements quality.
If you sell a home that was used as your principal residence for at least two of the previous five years, you get to keep some of that profit tax free. Married taxpayers filing jointly can keep up to $500,000, and single or married filing separately can keep up to $250,000 each.
If your capital gain exceeds the limits above, you can reduce it by the amount of your selling costs, including broker’s commissions, title insurance, legal fees, and other costs. You can also deduct any decorating or repairs that you did to make the more saleable.
Of course, all tax matters should be reviewed with a tax professional.
This information was provided by one of our preferred vendors, Supreme Lending. Thank you, Cale Iorg, Senior Loan Officer NMLS# 1121662, for this information.