San Diego, CA (PRWEB) May 03, 2014
LoanLove.com is a borrower advice website that is dedicated to helping borrowers find home loans that they will love. With first class information, valuable resources and connections to top rate industry professionals, the website has quickly become a trusted destination for current news and expert loan advice. A recent guide from the website continues to help home loan borrowers to save money on their home loans by explaining how they could be benefiting from mortgage interest tax write-off savings.
This new article from Loan Love titled, “Mortgage Interest Tax Shield (Maximize Your Savings)” explains that out of the total mortgage payment home owners pay each month, a large portion of it is going towards the interest on the loan and not towards the loan’s principle. The upside to this is that this interest is deductible for taxpayers, as long as they itemize instead of simply taking the standard deduction. This deduction is often cited as one of the biggest advantages of owning a home rather than renting one. For most borrowers, the entire amount going towards interest can be deducted; however, those who have taken out a home loan of over $1 million should expect the IRS to limit their mortgage interest deduction.
Loan Love says, “It isn’t only your home’s first mortgage that paves the way for a tax break via a mortgage interest deduction. If you refinanced to improve your cash flow picture, or secured a home equity line of credit or home equity loan, you also get a tax break. The IRS allows you to take a full mortgage interest deduction for equity loans or credit lines up to $100,000. Even if you own multiple properties, in most cases you will still be able to fully deduct whatever mortgage interest you pay. For example, if you purchase a vacation home down the line, you will be able to deduct the interest for the mortgage you take out on it. You can even deduct the mortgage interest for a boat in certain cases, if you use it as a primary or secondary living space. But you will have to prove it has cooking, sleeping and bathroom facilities. There are a few other limitations, so be sure to consult your tax advisor or accountant.”
The mortgage interest tax deduction guide also explains that those who pay points on their mortgage in order to get a better loan rate can usually also claim them as a deduction on their taxes. However, there are a few differences in how points are deducted vs. how normal mortgage interest is deducted. Loan Love says, “The IRS allows taxpayers to deduct points in the same year they pay them if the following holds true:
- The loan is for the purchase or construction of your primary residence
- Payment of points is an established business practice for your area
- The points you claim fall within the typical range”
The article also clarifies some differences in rules for deducting mortgage points paid on home equity loans and lines of credit, as well as for vacation homes or secondary residences. Lastly the article gives a brief overview of the impact of the mortgage interest deduction. It says,
“It’s little wonder that the mortgage interest deduction is held up as one of the primary advantages of home ownership, at least from a financial standpoint. Forbes estimates that middle-class homeowners were able to save about $615 on average during the 2012 tax season, thanks to the mortgage interest deduction. In fact, the mortgage interest deduction is the biggest personal tax deduction available to taxpayers. Its popularity with politicians has rarely dimmed and it is often held up as the pathway for making home ownership—and the American dream—attainable for the middle class.”
The article continues, “Even so, the larger the home mortgage, the greater the deduction. It is the wealthiest tier of the middle class that comes out ahead with tax breaks from mortgage interest, though every home owner will benefit. Mortgage interest deductions alone are not going to be the trigger to move more renters into the home ownership arena. The measure is, however, the icing on the cake for those families ready to enjoy home ownership.”
For more information on this subject, click here to read the full guide at LoanLove.com.