The Mortgage Go To Guy!!

As tax time is upon us and with all the talk about recession, politics and the housing market, most people are not focused on the fact that we are only ten days from tax day.

So if you are a procrastinator as is the American-way, remember to plan for some of your Mortgage and Real Estate related tax deductions to save some money this year.

You do not have to look any further than your HUD-1 closing statement from the house you purchased in 2007 to find a few last minute deductions.

Here are a few places to look:

1) Discount Points

No one believes they should pay points… it is just a scam, right?

Wrong!!  Paying points can save a lot of money over time for a homeowner.  Think of paying points as “a bird in the hand”… if you pay it today, you will save it and a lot more tomorrow!

Lender Discount Points help lower the interest rates and because of this they are seen by the IRS as pre-paid interest charges.

As Mortgage Interest is tax deductible, make sure you are claiming the discount points you paid on your loan on your taxes.

Your lender will send you an IRS Form 1098 for Mortgage Interest Paid.  Have your accountant make sure you are getting credit for interest paid on the closing statement.

2) Pre-paid Interest

No… this is not redundant.  When you close your loan, your closing statement shows prepaid interest depending on how many days you will be in the property in the month you close.

The earlier in the month you close, the more days you pay!

It is pro-rated mortgage interest so as mortgage interest it is tax deductible!!

3) Pro-rated Property Tax

You do not pay tax on tax… so you will get a deduction for any property tax you pay at the closing table.

So many people say, “No Escrows!!”…but this is just one reason why letting your lender pay your taxes for you is beneficial!

4) Origination Points

Mortgage Brokers like me get “wholesale” pricing on the loans.  That means that the way we make money is by either offering a rate to the borrower that pays us back our fees…. or by charging origination points… or some combination of both.

If your Broker charged Points to lower the rate or to get you into a better loan, then this is also considered pre-paid interest.

5) PMI/MIP

If you are paying Mortgage Insurance on a loan that is over 80% Loan to Value (LTV) then you should be itemizing that for a deduction.

The IRS extended the deductibility of PMI through 2008 so take advantage!

6) HELOC / Equity Line

Make sure you are claiming the interest on your 2nd Mortgage or Home Equity Line of Credit!

Technically, you are only supposed to be able to claim it in the case that you are using it for home improvement, debt consolidation or hurricane repairs… but let your Accountant make that decision.

If you closed with an 80% first mortgage and a 2nd mortgage of any type, the whole line should be tax deductible - let your accountant know!

7) Second Home

Ok… this is a grey area.  Your accountant knows the rules on deducting mortgage interest on 2nd home mortgages.

As I am not a tax pro, I will be vague so I don’t get too far out of the realm of my licensure.

Supposedly, you have to prove you use the property a certain amount of days a year to classify it as a 2nd home and thereby qualify for a tax deduction on the interest paid.  Let your accountant consult with you on this one!

If you rent it out for most of the year but use it sporadically like a short term rental or condo-hotel, you just want to make sure your Accountant reviews your usage history.

Depreciation

Investment properties only!!  If you own an investment property, you should be deducting the depreciation of the property based on what type of structure it is.

Remember, residential properties like apartments depreciate on a different schedule than commercial properties like office condominiums!

If you have larger commercial properties - worth over $500,000 - you may look into a cost segregation analysis to save you even more money this year and for as long as you hold the property!

My Professional Advice:

You have your closing package from when you closed your property neatly filed away, right? (nudge nudge)

Get it out and take it with you when you visit your tax preparation specialist or CPA.  Make sure to have your Accountant review your closing statement and IRS Form 1098 that you will receive from your lender in the mail.

Your accountant will then make sure you get credit for all your deductions.

Not sure you got your deductions when you closed the year before last or earlier??

If you did your own taxes and did not claim mortgage interest or closing statement deductions, it would likely benefit you to use an accountant this year to file an amended return.  Who knows, you may get a refund from years’ past!

For more tax saving deductions, read this Marketwatch.com article -o-> Don’t miss out: Some deductions are uncommon, but plenty of taxpayers qualify

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David A. Podgursky, MBA

TheMortgageGoToGuy!! Your Source for Residential and CommercialMortgage Loans in Florida