When you buy a home, there are tax deduction benefits. These include mortgage interest and points you paid to receive a lower interest rate. It is also possible to deduct the property tax you paid during the year as well as any mortgage insurance premiums required if you didn’t make a large down payment. First-time homebuyers may be able to receive credits that can increase your tax refund.
IRS Form 1098 reports the amount of mortgage interest you paid during the year. It includes regular mortgage interest as well as any points you paid, refunds you received from paying too much interest and mortgage insurance premiums you paid. This document is typically sent to you by your mortgage servicer.
Property Tax Statement
You may be able to deduct the property tax you paid during the year and any prorated property taxes you paid at closing. Review your final bill of the year or the year-end statement you may receive in some cities, to report the correct amount. The IRS does not require you to include this documentation with your return, but keep it on hand in case of an audit.
The settlement statement provides the figures you will need to claim certain credits such as the first-time homebuyer’s tax credit, the purchase price and date. If any of the interest or tax payments you want to deduct are not included on tax statement, contact your tax professional to determine how to claim or qualify for those deductions.
Mortgage Credit Certificate
Some state and local government agencies offer incentives for first-time home ownership by providing mortgage credit certificates. These provide a dollar-for-dollar offset of federal income taxes, although you are required to reduce the amount of mortgage interest you deduct by a percentage of the credit. To claim the mortgage interest credit, contact your tax professional to determine how to claim or qualify for those deductions.
Source: The Nest
Disclaimer: George Mason Mortgage is not a tax service and cannot provide tax advice. Please consult a tax professional to determine applicable tax deductions. This information is for educational purposes only.