For many Americans, tax season means added stress and some challenges finding all of those oh-so-precious documents you’ve hoarded away for the last year to prove to the IRS that you paid your tithes. Tax season can also mean some big tax deductions for homeowners and in all likelihood will be one of the biggest deductions of your entire return.
Here are a few mortgage FAQs as they pertain to your 2018 taxes.
What exactly can I deduct?
As a homeowner, you are allowed to deduct the interest you paid on your mortgage for the entire 2017 year as well as some costs associated with closing as long as they were paid in a lump sum and not rolled into a mortgage product. Until the most recent tax overhauls, homeowners were also allowed to deduct state and local taxes paid on their properties.
How Much Can I Deduct?
Mortgage deductions are generally the average American’s largest deductions on their annual tax return, but there are some limits. If you built your first home in 2017, your expenses associated with that build including any property improvements or additional costs associated with the build can be deducted up to one million dollars. If you already have a home, you can deduct the interest on your equity note for up to $100,000.
Do Second Homes Count for Anything?
If you’re one of the fortunate few with a second home, you’re in luck! You can deduct 100% of your interest paid on a second home, but there are few stipulations. If you live in the home part of the year and rent it for another part, you must live in the home for 10% of the rented time. In other words, if you rent your home for 30 days per year, you must live in it for at least 3 days. If you don’t rent your second home at all, you must live in it for 14 days each year.
What About Rental Property?
Rental property strays away from the general rules of home deductions. If you own rental property and it produces an income, then the IRS is more likely to see that as an income stream rather than a deductible expense. Of course, a tax professional can give you all the details on rental property, but it’s best to keep those funds in separate accounts (like you would a business) in order to prove cashflows to inquiring IRS agents or CPAs.
How Should I Finance My New Home?
That’s a great question, but one that isn’t easily answered. There are a multitude of mortgage solutions available to first time homebuyers or second home purchasers. With that said, it’s best to consult a loan officer, and Tidewater Mortgage Services is the best in the business. For over 20 years, Tidewater has been working with home buyers to find solutions that work best for them.
Need a mortgage for a new home? Perhaps you need some extra cash to fix up your existing home. No matter the case, Tidewater has a product ready for you. One call can get you qualified for the funds or credit you need for your new home purchase. Call Tidewater today!
