Tax Deductions for Frederick Homeowners 2014 There are tax advantages to home ownership. Tax deductions for homeowners have been in place for generations, because owning a home is generally considered to encourage better neighborhoods and good citizenship in many ways. Although the details change periodically, the basic tax deductions and benefits for homeowners who itemize deductions are typically these: 1. Mortgage Interest Deduction, or MID. The MID is the most well-known benefit of home ownership. The interest you pay on your mortgage is deductible (on a mortgage with a balance of up to $1 million). This includes your main home and a second home. [Did you know a boat can be considered a second home…if it has a kitchen, bedroom and head. You can deduct mortgage interest paid on it. The same is true for an RV.] Homeowners benefit the most in the first half of the life of their mortgage, when the bulk of the monthly payment is interest. (Consult the IRS website for the rules regarding MID) Homeowners in the U.S. save around $100 million every year by deducting their MID, according to NAR (National Association of Realtors) 2. Private Mortgage Insurance (PMI). When the downpayment is less than 20%, there is usually Private Mortgage Insurance. This provision has been phased out for both single and married filing jointly with adjusted gross Interest Rates and Affordabilityincomes over $100,000. Currently, it has not been renewed for 2015, only for 2014. The provision allows homeowners to treat mortgage insurance premiums the same as interest. This deduction only applies to mortgages (not refinances) which began after 2006. 3. Points and Origination. If you purchased in the last year you can deduct any points or origination fees. (These fees appear on lines 801 and 802, of your HUD 1 settlement sheet, they now net out in line 803.) They ) are generally deductible for the purchaser/borrower, whether or not they are paid from the borrower’s funds or the seller’s funds at settlement, so long as they meet specific tests. If you Refinanced: These items usually must be amortized over the period of the loan (for example, 1/360 for each month of a 30-year loan). However, if you sold or refied again in 2014, you can deduct whatever amount remained from your earlier refi if you refinanced with a different lender. Unfortunately, if you refinanced with the same lender, the points must continue to be deducted over the life of the loan. 4. Home Improvement Loan Interest. The interest on a home improvement loan may be tax deductible. Typically, interest on loans used for home improvements can be totally deducted up to $1 million of combined secured mortgage debt; used for anything other than home improvements, the deductible interest is limited to that on $100,000 of combined secured mortgage debt. See IRS Pub. 936 for details. See the entire article on our website.