Millions of people are familiar with numbers like 1040, W-2, and INT-1099 again this time of the year. You can claim deductions to offset some of the tax burdens that come with having a mortgage. Let's take a look at some tax deductions that you can use to offset your tax burden as you file your annual taxes. For those with less than $1million in a mortgage (which is most of us), You can fill in Schedule A, also called "itemized deductions", and claim the interest you paid on your mortgage the previous year. This is only for your primary residence (wherever you live). It does not include any other properties or houses that you might own for rental purposes. You can use Schedule A if you have been penalized for not paying your mortgage in total this year. This does not include any other properties or houses you may own for rental purposes.
You may be eligible for a deduction for interest if your mortgage company pays your taxes through an escrow account. Keep in mind that if your home equity loan and your mortgage amount exceed the actual value of your home, there are limitations on what you can deduct. Points of any type are generally tax-deductible. Any points paid to lower the mortgage rate last year can be deducted proportionally over the loan's life. If you have a 20-year mortgage, you can deduct one-fifth of the points each calendar year. You can also get an additional bonus if you refinance in a previous year, then refinance against the prior year, and end up paying off the first loan. If you refinanced in a prior year and then refinanced against in the current year, all points paid on that purchase are fully deductible. This can be tricky, so make sure you consult your tax preparer for more details. Owning a home means you have the opportunity to take advantage of the tax system. You don't want the IRS to keep the money you could use to pay down your mortgage quicker!
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