It's our favorite time of the year! Tax time, and all of the document collecting, number crunching, and bill paying that goes along with it. In today's episode I'm talking about the 4 biggest tax deductions you could be eligible for as a homeowner.
Tax Benefit #1: Mortgage Interest Deduction
This tax deduction allows you to deduct the mortgage interest that you pay during the year. The new tax code stipulates that any mortgage interest paid on first or second mortgages (up to a combined cap of $750,000 mortgaged amount) can likely be deducted.
Tax Benefit # 2: Privatized Mortgage Insurance (PMI)
PMI is an insurance premium that is required by a lender when buyers have less than 20% equity in their home. PMI is paid as a monthly premium, and those premiums can equal up to $150 dollars per month. Those monthly premiums can often be deducted on your taxes, which can amount to a sizable deduction.
Tax Benefit #3: SALT - the State and Local Tax Deduction
This benefit permits you to deduct your state and local taxes, which include your property taxes. The tax code stipulates that taxes are deductible up to a cap of $10,000. If you live in a high tax area, or in a higher priced home, this could end up keeping a large amount of money in your pocket.
Tax Benefit #4: Lender Points
The last benefit only applies if you paid lender points on your mortgage. When you are applying for a loan, many lenders offer the flexibility of buying down your interest rate by paying what they call POINTS up front. Each point typically costs around 1% of your loan amount, and in some cases those points can be deducted on your taxes.
Of course, please do consult your individual tax preparer with questions regarding your individual taxes, but this should give you an idea of ways that you can save some extra $$ on your taxes this year.