by Tim McLaughlin

Dear Mr. And Mrs. Homeowner: Your home is probably
brimming with tax advantages. Do you know about all the
breaks you are entitled to? Obviously, you should always
consult a professional tax advisor for details, but here’s a list
of the top 5 tax deductions for homeowners:
1. Mortgage Interest – Mortgage interest on a home is
usually fully tax deductible. You can deduct interest on
multiple mortgages, as long as they do not exceed $1
million. The purpose of the mortgage must specifically
be to buy, build or improve a home.
2. Points Paid on a Purchased/Refinanced Loan – If you
refinanced, you may be able to write off any points you
paid to buy down the mortgage rate. To do this, you
deduct the points proportionately over the life of the new
loan. For example, if you took out a 30 year loan, you
would deduct 1/30th of the points you paid each year.
Remember, if you’ve refinanced before, and you have
points from the previous refinance that you haven’t
finished deducting, you can write off the rest of those
points in the year you refinance. If you bought your
home last year, the points you paid at closing are
deductible on your income tax statement for that year. If
the seller paid some (or all) of your points for you, you
may be able to deduct those seller paid points too!
3. PMI – extended through 2010! Late in 2007, Congress
extended the tax deduction for homeowners paying
private mortgage insurance through 2010. This one has
some restrictions: for example, the borrowers must have
an adjusted gross income under $110,000.
4. Capital Gains with No Income Taxes – Thanks to the
1997 Tax Act, once every two years, single homeowners
can realize a tax-exempt profit of up to $250,000, as
long as the seller owned and occupied the home as a
principal residence during any two of the last five years.
Married homeowners who file jointly on their tax returns
do not have to pay taxes on up to $500,000 of gains
when they sell their primary residence.
5. Refinance – Well, sure, I guess this one isn’t really a
true “tax break”, but when you reduce your payment
and/or loan term at historically low interest rates, it will
feel like one. Need help refinancing? Ask us how!

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