By: RE/MAX Complete
Q: Ever wondered what is tax-deductible when buying or refinancing a home?
If you have been listening to the news lately, you know that President Obama is trying to change what I am going to talk about today.
"The president once again proposed in his budget to curtail high-income earners' tax deduction for mortgage interest payments and charitable contributions.
Under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their contributions and mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House."
--By Tami Luhby, senior writer
But for now, with the current laws you can generally deduct the following:
NEW HOME PURCHASE
- Origination and discount points
- Interest you pay during the year
- Property taxes
- Other closing costs (such as the cost of appraisal, inspection, credit report, etc.) are not tax-deductible
One detail that may surprise you --when you are buying a home, you can deduct the points even if the seller pays them.
REFINANCING YOUR HOME
- Points are not deductible; instead you have to "depreciate" them over the life of the loan.
- Other closing costs (such as the cost of appraisal, inspection, credit report, etc.) are not tax-deductible, regardless of whether you are buying or refinancing.
- The down payment is not tax-deductible either.
These are general rules-of-thumb, and they might be different for you, depending on your situation (income level, the purpose of buying the home, etc.)
To be safe, it is always best to consult your CPA for specific guidance for your individual situation.
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