is that the home mortgage interest and real estate taxes paid can be deducted from your federal income tax. To do so, you’ll need to comply with current tax laws and complete the appropriate federal tax forms and itemized deduction schedules.
- The mortgage loan must be secured by your main home or a second home
- Only interest paid for that tax year can be deducted.
Points
Points (aka loan origination fees, maximum loan charges, loan discount, or discount points) are generally treated as pre-paid interest and, as such, the full amount cannot be deducted in the year paid. Rather, the deduction must be taken over the term of the loan.
State or local real estate taxes can be deducted from your income if they are paid during the tax year. To qualify, the tax must be levied on the
property’s assessed value, the taxing authority must charge a uniform rate for properties in its jurisdiction, and the tax must not be for your special privilege but for the benefit of the general welfare.
Restrictions on Itemized Deductions
The amount of itemized deductions you can take are restricted by your adjustable gross income. In 2003, the limits were $139,500 for single
persons, persons filing as head of household or qualified widow(er), or married persons filing jointly; and $69,750 for married persons filing a separate return.
Non-deductible Items
Many of the expenses related to owning your own home cannot be deducted from your income tax. These non-deductible items can include:
- Most settlement costs, including (but not limited to) appraisal fees, notary fees,VA funding fees, and mortgage preparation cost.
- Insurance
- Local assessments that generally add value to your home, such as sidewalks, sewers,etc.
- Utilities
- Domestic help
- Depreciation
Check with the IRS
The information contained in this article is for information purposes only and do not reflect current tax year rules and regulations. You’ll need to consult with your attorney, CPA, or the IRS for current tax year rules, restrictions and regulations.
