Don't Forget to Tap Your Mortgage for Valuable Tax Deductions

If you're a homeowner, it's always a good idea to make sure you haven't missed any tax deductions. You may not be able to take all of these deductions, so please check with your tax advisor.

Mortgage Interest

Did you know that mortgage interest is tax-deductible?  You're allowed to deduct the interest on a loan secured by your first or second home. You may be somewhat limited if all mortgages on your home total either more than the fair market value of your home, or more than $1 million ($500,000 if you're married and filing separately from your spouse); or if your home equity loans total more than $100,000 ($50,000 if you're married and filing separately). But be sure you're not missing out on this one -- mortgage interest is a big deduction that some homeowners don't even know about.

Discount Points

If you refinanced your mortgage, you may be able to write off the points you paid to reduce your interest rate on the new loan. These points must be deducted proportionately over the life of your loan. So if your new loan has a 30-year term, you'll deduct 1/30th of your points each year. If you've refinanced before, and you have points from the previous refinance that haven't yet been deducted, you can write off the rest of those points in the year you refinance.

The points you paid for to reduce your interest rate on a home purchase loan are also tax-deductible for that year. Whether you or the seller paid for the points for you, you may be able to deduct them.

Capital Gains on the Sale of a Home

Once every two years, unmarried homeowners can profit from the sale of their home without having to pay taxes on the gains for up to $250,000, as long as the home was the seller's primary residence for two of the last five years. Married homeowners filing joint tax returns do not have to pay taxes on up to $500,000 of the profits from the sale of their home.

These three tax deductions can be very important when it comes time to pay your taxes and can possibly save you a lot of money. To learn more, use Quicken Loans Tax Savings Calculator and be sure to consult your tax advisor.

Courtesy of ARA Content