So you finally purchased your home, and are excited to have something to call your own. In addition to wonderful new living space, you also get some pretty great tax breaks as well. In some cases, certain tax incentives can even be applicable to your second home. And if you’ve been in your home for a few years, there’s still some things you need to know as a homeowner at tax time.
If you hold a mortgage, your lender will send you a Form 1098, which will document the amount you paid in mortgage interest. Provided your mortgage loan is less than one million dollars (married filing separately taxpayers have a threshold of $500,000) you’re eligible to deduct 100% of the interest and property taxes you paid. However, in order to take this deduction you have to itemize. You should do a little calculation to determine if your total itemized deduction is higher than the offered standard deduction. You should choose the option that gives you the best benefit. Additionally, you can deduct charges for late payment or pre-payment.
Are you aware that you can deduct property tax that you pay? In many cases, property taxes are included in the amount of your mortgage loan, which means you’ll find all the tax information you need on your lender’s annual statement. Real estate taxes are eligible for deduction on Federal tax returns, but rules vary for deduction on state taxes depending where the property is physically located.