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Write-Offs to Remember

Posted on October 30, 2020 by Ray Williams (NMLS #216267).

It’s time to start thinking about how you’ll be filing your taxes! Come January, with the transition into a new year, comes the first phase of organizing taxes for the year prior. While the deadline for getting your taxes filed isn’t until April, many people begin filing and making notes of their write-offs at the beginning of the year. Write-offs are expenses that may be recorded while filing your annual taxes in order to receive reimbursement. It’s important for homeowners to understand how to take advantage of these tax deductions in order to soften the blow of otherwise heavy taxes. Itemizing deductions can help households save thousands of dollars, depending on individual factors. The pros here at Mortgage Maestro Group have compiled a brief list of the main write-offs homeowners should aim to remember when it’s finally time to file. 

Mortgage Interest 

Did you know that mortgage interest qualifies as a tax write-off? Depending on your mortgage interest rate, in conjunction with your income and the specifications laid out in the tax code, you could be eligible for a tax break by claiming your mortgage interest expenses. There are certain caveats that limit the amount of interest that may be claimed as a write-off, and these limitations are determined by individual factors like the size of the home loan and the origin of the loan. Check with your lender and consult the IRS website for a more in-depth assessment of your eligible interest claim. Your mortgage provider can also assist you with collecting your expense information, including all payments and interest accumulated since the origination date of your loan. 

Home Equity Loan Interest 

Similar to claiming your mortgage interest, your Home Equity Loan may also be considered toward a possible tax deduction. Interest from a home equity loan or credit line may be specifically claimed for a tax write-off if the capital was used to improve the home. One caveat to keep in mind is that the home equity interest counts toward the mortgage debt limit, including your mortgage interest. If your mortgage interest surpasses this limit—specified by the tax codes for the given year—then you will not be able to claim home equity loan interest. As of February 21st, 2018, the IRS website cites the home equity loan interest as deductible. The mortgage interest deduction limit for homeowners filing individually or jointly has been lowered as well, which is helpful to consider when claiming mortgage interest or home equity interest. Be sure to gather an accurate picture of your total interest from each individual loan plan to ensure you get the most out of your tax return. 

Other Tax Breaks

Property tax is deductible up to $10,000 dollars for joint filers or $5,000 for couples filing separately. Additionally, home improvements made due to medical necessity (i.e. handicap accessibility or removal of harmful mold) may be deducted. For homeowners who are self-employed and working out of a home office (or other forms of eligible workspaces such as a kitchen or garage), the IRS website offers several calculators for specifically calculating potential deductibles. Mortgage insurance premiums, in certain instances specified by the annual tax code, may also be deducted (be sure to discuss eligibility with your policy provider). 

When it comes to filing taxes as a homeowner, knowledge is power. At Mortgage Maestro Group, we empower our clients by providing expert guidance in all matters relating to home loans and homeownership. For more information about our services, visit our website. To learn more about homeownership and financial strategy, check out our frequently updated blog or contact us.

 

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