It's that time of year again when jolly ol'Saint Nick, spooked by the IRS, flees north to his frozen, yet coveted, tax shelter in the Arctic Circle. If only we could follow him there. Or can we? If you purchased your home in 2013 or took advantage of historically low rates with a refinance you might be eligible for these four tax benefits. To reap the full reward, you must itemize your deductions on a schedule A rather than take the standard deduction. I've listed them along with the documents you'll may need.
1. Mortgage Interest Deduction
The most common deduction is the mortgage interest deduction which, under certain criteria, allows you to deduct all of the interest from your income. Interest is a sizable portion of your mortgage payment and really adds up so it's a nice deduction to take.
Interest is reported on several documents that your lender produces and must deliver prior to January 31st:
~1098, a Mortgage Interest Statement
~Annual Mortgage statement.
2. Property Tax Deduction
No doubt your county levies a tax on your home. Property or real estate tax is a sizable portion of your hard earned dollars making it another nice, allowable deduction and can be found on the following documents:
~Annual Mortgage statement
~County tax card/certificate
3. Points Paid That Year
Points paid on a loan used to purchase or build your primary residence may also be deductible so long as you meet all IRS criteria. A point is prepaid interest which the IRS defines as “loan origination fees, maximum loan charges, loan discount, or discount points”.
You can find paid points on the following documents:
~HUD-1 Settlement statement, signed at closing. If you can't find this document, contact your lender or the title company for a copy.
~1098, a Mortgage Interest Statement
4. Mortgage Insurance Premium – expiring 2013
The mortgage insurance you paid throughout 2013 is considered interest and may be deductible. Mortgage insurance comes in several forms including the up-front premiums typical on FHA, Rural Development, and VA loans. This deduction expires after this tax year so take advantage while you can.
~Mortgage insurance is found on the 1098.
Unlike Santa, evading taxes will land you in jail. And fleeing to the North Pole is simply out of the question. But, you can take full advantage of your home deductions and enjoy a little savings with the tax breaks it provides.
The following is a link to the 2013 Home Mortgage Interest publication provided by the IRS, and remember, consult the proper professionals to avoid costly mistakes: http://www.irs.gov/pub/irs-pdf/p936.pdf