Deductions for Mortgage Interest and Points
There are many tax benefits to home ownership, most everyone knows
about the mortgage interest deduction. Homes located in the 'squeeze
zones' all over America are still in a state of
foreclosure rates unheard of since the 1930's. Consider acting soon on
a foreclosure if you are in the market to buy a home.
Points
When you buy a house, you get to deduct in one giant sweep the points you paid to get your mortgage. When you refinance a mortgage, though, you have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it's a 30-year mortgage. That's $33 a year for each $1,000 of points you paid.
Even more important, in the year you pay off the loan -- regardless of the reason why -- you get to deduct all as-yet-undeducted points. There's one little exception to this sweet rule: If you refinance a refinanced loan with the same lender, you add the points paid on the latest deal to the leftovers from the previous refinancing--and deduct the amount gradually over the life of the new loan. Homes in these squeeze regions are still selling for up to 50% off previous home market values.
Interest and property taxes
Home mortgage interest on up to $1 million ($500,000 if married filing separately) of home acquisition loans secured by your principal residence and/or second home is fully tax deductible. You also may deduct mortgage interest on a home equity loan or line of credit up to $100,000 ($50,000 if married filing separately). Therefore, you can deduct interest on total home debt up to $1.1 million ($550,000 if married filing separately).
The Housing Price Bubble from Jan 2002 thru Jan 2009 is over
chart courtesy of the economics blog: calculatedriskblog.com
Mortgage debt forgiveness
If you were the one who had a house foreclosed on and you still had mortgage liability after foreclosure, any amount forgiven by the lender was usually ordinary income. However, for debt discharged on or after January 1, 2007 and before January 1, 2013, the debt forgiveness is treated as tax free if the property was your primary residence. The limit on qualifying debt is $2 million ($1 million for a married person filing separately).
First Time Home Buyer Tax Credit for Members of the Armed Forces
Members of the Armed Forces and certain federal employees serving
outside the U.S. had an extra year to buy a principal residence in the
U.S. and still qualify for the credit. These eligible taxpayers
had to buy or enter into a binding contract to buy a home by April 30,
2011, and settle on the purchase by June 30, 2011.
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