Your Home Mortgage Tax Tips

Sheryl Landrum
LoanBiz Columnist


Whether you are taking out a new home loan, a home improvement loan, or refinancing your current home, certain loan fees and costs are tax deductible. Here is what you need to know come tax time:

• Residential mortgage loan points are deductible in the year paid if the mortgage loan is used for the purchase of a home or for capitalized home improvement costs.
• Residential loan points are amortized and deducted over the life of the mortgage loan if the mortgage loan is used to refinance an existing mortgage or is used for a purpose other than the home (i.e., purchase a car).
• Second home, investment home and rental home loan points are amortized and deducted over the life of the mortgage loan.
• If you paid an existing mortgage early and accrued a prepayment penalty by the lender, that prepayment penalty is an itemized deduction.
• Home construction loan interest is deductible if the construction period does not exceed 24 months before occupancy of your principal residence.
• If you bought or sold property last year, remember to deduct any pro-rated real estate taxes and prorated mortgage interest. Your closing settlement statement shows the amount of pro-rated taxes and insurance you paid.
• Prepaid mortgage insurance and property taxes are also tax deductible. If you prepaid this year's property taxes last year or made your January mortgage payment in December for extra tax credit, don't forget to deduct these items on your tax return.

Owning a home and a mortgage is one of your best assets and greatest money savers come tax time. To ensure you take advantage of every home deduction possible, see your CPA or your loan officer to make sure you have a comprehensive understanding of the legal and tax consequences of buying and selling property.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.