Tax Benefits and Home Ownership

By: Anita Koppens

Tax Deductions for Property Owners Include Mortgage Interest Write-offs

Mortgage interest deductions are the ultimate tax benefits for homeowners, considering that unlike tenants, homeowners are permitted to deduct all mortgage interest unless their home loan is also an unsecured personal loan. Interest paid on personal accounts including credit cards, car loans and other personal loans is not tax deductible, although the interest paid on student loans typically is. First and second residential mortgages, as well as home equity lines of credit, qualify real estate owners for tax write-offs for interest paid.

Real estate owners with two properties can take deductions for mortgage interest on both

Owners of two or more properties may take mortgage interest tax deductions on their primary residence in addition to tax write-offs for interest paid on a secondary home that includes cooking, toilet and sleeping facilities. Your secondary mortgage interest deductions can be for a detached home, houseboat, condo, townhouse, mobile home, trailer, patio home or cooperative apartment. Owners of more than one second home may only deduct interest from the first and second properties and not from the other ones. Luckily you can change the second property you deduct interest from in any given year.

Tax write-offs for mortgage interest call for specific forms

You will need two documents to receive the mortgage interest tax deductions. The first is a 1098 form, also named a Mortgage Interest Statement, which your lender mails you by the year's end. The second is a Schedule A form, where you detail all the itemized deductions you are expecting to claim. You can get the numbers for finishing the third section of the Schedule A form, which is the portion for mortgage interest deductions, from your 1098 form. The maximum home mortgage interest deduction can be written off a home mortgage of no more than one million dollars, or $500,000 if you're married but filing separately. If you plan to take mortgage interest tax deductions on two homes, the sum total of the two mortgages added together must fall within these limits.

Circumstances including home sales, prepaid interest, mortgage prepayment penalties, divorce and late payment charges can vary the qualifications and necessary conditions for mortgage interest tax deductions. If you have any questions about tax write-offs for interest paid, you must confer with an accountant to make sure you meet all the legal requirements for these itemized mortgage interest tax write-offs.

Mortgage interest tax deductions can also apply to rental homes and commercial properties

The majority of the mortgage interest you pay on any rental or commercial properties can typically be written off too. Tax write-offs for investment properties or home-based businesses are more involved than tax write-offs for interest paid on a primary residence, considering you can take advantage of tax deductions for operating expenses in addition to mortgage interest and property taxes. To qualify your second home as a rental home, you need to spend fewer than 14 days per year living there, and less than 10 percent of the time that it is available for leasing. You can also take operating expense tax write-offs for a business property, whether your business is based in your home or somewhere else. Operating expenses for business properties include maintenance and repairs, travel costs, depreciation and management expenses.

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