How Will Being a Homeowner Affect Your Taxes?
Doing your taxes can be stressful at times, it's true. You may be thinking:
- Did I miss something?
- Am I doing this correctly?
- What if I made a mistake?
All of those thoughts are perfectly understandable! As a homeowner, however, there are certain deductions that you should be aware of. Our mortgage company at the Lake of the Ozarks is here to give you a few examples of deduction you may want to look into this tax season, in this week's blog.
HAVE YOU THOUGHT ABOUT YOUR PROPERTY TAX?
Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes. That deduction is effectively a transfer of federal funds to jurisdictions that impose a property tax (mostly local but also some state governments), allowing them to raise property tax revenue at a lower cost to their constituents.
HOW MUCH DO YOU RENT OUR YOUR SECOND PROPERTY?
Homeowners can deduct mortgage interest and property taxes from second homes and vacation homes as long as the properties are rented for 14 days or less per year. If any rental exceeds the 14-day limit per year, the IRS considers this as an income property. When such income property is sold, the seller will either have to pay the capital gains tax or conduct a tax-deferred exchange for other income-producing real estate of equal or greater value. For income property, mortgage interest, property taxes, and other expenses must be deducted against any income produced by the property. Vacation and second homes include condominiums, houses, apartments, mobile homes, boats, and similar property.
DO YOU ITEMIZE YOUR DEDUCTIONS?
Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage. The deduction is limited to interest paid on up to $750,000 of debt incurred to purchase or substantially rehabilitate a home. While previously, homeowners were able to deduct interest paid on up to $100,000 of home equity debt, regardless of how they use the borrowed funds, in 2018, home mortgage interest from home equity loans will no longer be deductible.
When you're feeling stressed about doing your taxes, remember that you will get through this! We hope you found this blog helpful when it comes to understanding certain deductions you may want to claim on your next tax return. If you have any questions about your mortgage and how it may affect your taxes, contact one of our mortgage professionals at the Lake of the Ozarks. If we don't have the answer, we likely know who does. We can be reached at the phone number listed below. You can also follow us on our social media channels listed below to stay up to date on our latest announcements and mortgage tips.
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