Homeowners Benefit From Deductions

One of the advantages of owning your own home is that the home mortgage interest and real estate taxes paid may be deductable from your income tax*. Check with your tax consultant.

Real Estate Mortgage Interest

Typicaly for mortgage interest to be deductible, it must be for the purchase or improvement of real estate. Additionally

• The mortgage loan must be secured by your main home a second home or investment property. 
• Only interest paid for that tax year can be deducted.

The amount you can deduct may be limited if your mortgage balance is more than $1 million ($500,000 if married filing separately) or if the mortgage was taken out for reasons other than to buy, build or improve your home.

Points

Points (aka loan origination fees, maximum loan charges, loan discount, or discount points) are generally treated as pre-paid interest and, as such, the full amount cannot be deducted in the year paid.  Rather, the deduction must be taken over the term of the loan.

Real Estate Taxes

State or local real estate taxes can be deducted from your income if they are paid in the tax year. To qualify, the tax must be levied on the propertys assessed value, the taxing authority must charge a uniform rate for properties in its jurisdiction, and the tax must not be for your special privilege but for the benefit of the general welfare.

Restrictions on Itemized Deductions

The amount of itemized deductions you can take are restricted by your adjustable gross income. In 2003, the limits were $139,500 for single persons, persons filing as head of household or qualified widow(er), or married persons filing jointly; and $69,750 for married persons filing a separate return.

Check with the IRS your trusted tax professional

*The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Youll need to consult with your tax attorney, CPA, or the IRS for current tax year rules, restrictions and regulations.