Mortgage Monday: Tax Prep for Homeowners
Owning a home provides many financial benefits, such as building equity and not having to pay rent. Additionally, certain tax benefits and deductions are available to homeowners. With tax season almost in full swing, now is the time for homeowners to start preparing the documents they will need.
Aside from traditional income forms such as the W-2 and 1099, documents that homeowners should have on hand for tax preparation include:
Form 1098 – Provided by your mortgage lender, Form 1098 shows payments on interest, points and private mortgage insurance. This form often includes the amount of real estate taxes paid. With Form 1098, homeowners can file for a mortgage interest deduction (MID).
Loan Contracts – These will show information about the points paid on your loan that might be deductible along with the MID. Additionally, the interest taken out to make significant renovations to your home may be used to reduce the amount of taxes owed.
Home Improvement Receipts – If you made improvements to your home to increase its energy efficiency, those improvements may be tax-deductible. Receipts and information about the purchases will be helpful in determining their deductibility status.
Mortgage Credit Certificate – If your loan had a Mortgage Credit Certificate (MMC) attached, this will be redeemed when you file your federal taxes. An MMC is a document provided by your mortgage lender that converts a portion of the paid mortgage interest to a non-refundable tax credit.
Other deductions or tax breaks that may be available to homeowners are:
State and local property taxes
Home office expenses
Capital gains from home sales
We would love to connect you with our trusted business partners who can explain the tax benefits available to you. Also, if you are considering buying a home or refinancing, call us today to discuss your options!