Personal Finance, Tax Tips, Taxes

5 Real Estate Related Tax Deductions To Save You Money

March 1, 2013 by · Leave a Comment 

Tax Saving Tips For 2012 Tax ReturnApril 15th seems a long way off, but it will be here before you know it. Now is the best time to start getting your paperwork in order.

Owning real estate can make a big difference on your tax return, so make sure that you’re taking advantage of all the deductions you’re entitled to.

I’ve outlined several real estate related tax deductions that are a must below:

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Mortgage Interest
Unless you paid cash for your purchase, you probably took out a loan to buy your Northwest Indiana home.

Mortgage interest is one of the best tax deductions available, so be sure to hang on to that 1098 Mortgage Interest Statement from your lender.

You can almost always deduct the entire amount of interest paid per calendar year.

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Real Estate Taxes
Depending on where your property is located, you are likely paying real estate tax, either to the state or to a local governing authority.

Taxes based on property value are generally deductible as well. You may have an escrow account to hold these funds during the year, so be sure that you only deduct the amount of taxes you actually paid.

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Home Equity Line of Credit
You may deduct home equity line of credit (HELOC) debt interest as long as you are legally liable to pay the interest, the interest is paid in the tax year, and the debt is secured by your home.

The home equity debt has a limit of up to $100,000 ($50,000 if married filing separately).

Mortgage Insurance Premiums
Depending on how your loan is structured, you may have mortgage insurance. With the recently passed American Tax Relief Act of 2012, all mortgage insurance premiums are tax-deductible for the 2012 and 2013 tax year. There are some qualifications, so check with your tax advisor.

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Mortgage Interest on Land
If you purchased land with the intent to build, the interest you have paid may qualify as deductible mortgage interest as long as the structure becomes your qualified residence within a 24-month period.

This deductibility of bare land mortgage interest is a tricky one. You can see the IRS explanation here.

Your home could be one of your greatest resources for reducing your tax liability. Most times these deductions are itemized on a Schedule A (Form 1040) when you prepare your taxes.

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A great next step is to speak with a qualified tax planning professional.  Contact us if you would like a referral.

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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