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Tax Season Is Here – Make Sure You Use These Tax Deductions

Posted by Kent Redding

AUSTIN, TX. -  Tax season is here and with April 15th just under one month away it’s important for every homeowner to make sure that they take advantage of all of the tax breaks available to them.

In this article, we will provide you with a list of tax breaks that you can tax advantage of when you file your taxes.

Mortgage interest

This is the big kahuna: All of the interest you pay on your mortgage is tax-deductible for loans up to $1 million, says Mark Jaeger of TaxAct. You do have to itemize deductions to take it, but it’s almost always worth it, especially with a new loan. Most mortgages are structured so that you pay the interest first. So if you have a $300,000 fixed rate 30-year loan at 4% interest, in your first year, you’d be deducting $10,920. (Find out how much you’ll save using our mortgage calculator.)

Private mortgage insurance

If you couldn’t make a 20% down payment on your home, most lenders require that you pay private mortgage insurance (PMI). The upside is, it’s tax-deductible as long as your adjusted gross income is less than $100,000. (For each $1,000 you make after that, you can deduct 10% less of your PMI, up to $109,000.) PMI is generally between 0.3% and 1.5% of the loan amount annually, so on a $300,000 loan, you’d be deducting between and $900 and $4,500.

Points

If you bought or refinanced a home in 2016, you may have paid points—fees that you pay when you get your loan, either to lower your interest rate or to cover origination fees. Each point is 1% of the loan amount, so a $300,000 loan with two points would mean a $6,000 deduction for you.

Refinance points, however, have to be amortized over the life of the loan. So for that same $300,000 loan, if you’re refinancing with a 30-year fixed mortgage, you’d be deducting $200 a year for the next 30 years (or until you sell the property).

Home improvement loan interest

In addition to deducting the interest on your mortgage, if you take out a HELOC or a home equity loan that you spend improving your home, you can deduct up to $100,000 of interest on that loan. A $50,000, 15-year home equity loan at 7% interest will give you a $3,157 deduction in the first year.

Property taxes

Every cent you pay in property taxes has an upside: It’s deductible! Property tax rates vary in the U.S. from 0.28% to 2.38%. On a property assessed at $300,000, you’d be deducting between $840 (in Hawaii) and $7,140 (in New Jersey).

Learn more about tax deductions you may qualify for by clicking here.

Search for Homes in Austin Texas

To learn more about tax deductions, or to search for homes in Austin Texas contact the Kent Redding Group today by calling us at (512) 306-1001 or click here to connect with us online. 

 

The Kent Redding Group

#1 Berkshire Team in Texas

512-306-1001| www.CallKent.com 

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