Harbortown Mortgage Blog

Own a home?  If you do, one of the added benefits of home ownership is that the mortgage interest and real estate taxes paid can be deducted from your federal income tax*. To do so, you'll need to comply with current tax laws and complete the appropriate federal tax forms and itemized deduction schedules.

Mortgage Interest

For your home mortgage interest to be deductible, it must be for a first or second mortgage, a home improvement loan or a home equity loan. Additionally

• The mortgage loan must be secured by your main home or a second home
• Only interest paid for that tax year can be deducted

The amount you can deduct can be limited if your mortgage balance is more than $1 million ($500,000 if married filing separately) or the mortgage was taken out for reasons other than to buy, build or improve your home.

Points

Points (aka loan origination fees, maximum loan charges, loan discount, or discount points) are generally treated as pre-paid interest and, as such, the full amount cannot be deducted in the year paid. Rather, the deduction must be taken over the term of the loan.

Real Estate Taxes

State or local real estate taxes can be deducted from your income if they are paid in the tax year. To qualify, the tax must be levied on the propertys assessed value, the taxing authority must charge a uniform rate for properties in its jurisdiction, and the tax must not be for your special privilege but for the benefit of the general welfare.

Restrictions on Itemized Deductions

The amount of itemized deductions you can take are restricted by your adjustable gross income. In 2003, the limits were $139,500 for single persons, persons filing as head of household or qualified widow(er), or married persons filing jointly; and $69,750 for married persons filing a separate return.

Non-deductible items

Many of the expenses related to owning your own home cannot be deducted from your income tax. These non-deductible items can include:

• Most settlement costs, including (but not limited to) appraisal fees, notary fees, VA funding fees, and mortgage preparation costs
• Insurance
• Local assessments that generally add value to your home, such as sidewalks, sewers, etc.
• Utilities
• Domestic help
• Depreciation

Check with the IRS

*The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Youll need to consult with your tax attorney, CPA, or the IRS for current tax year rules, restrictions and regulations.

Below are 10 tips to become more energy efficient and "green."  Applying some of these points will also start to save you some money!

1. Turn off lights, computers, TV's and other electronics when you are done using them.  Unplug them if you can! (see #3)

2. Change your air filters regularly.

3. Electronics on "Standy power" consume power as well, so unplug those that do not require power at all times.

4.  Keep your tires properly inflated for optimal gas mileage.  Not only will you get better gas mileage, but you will also extend the life of your tires.

5.  Keep your car in good working order. 

6.  Buy energy efficient lighting.  They cost more up front, but they will save you money in the long run.

7.  Don't heat or cool your house when no one is home.  Get a programmable thermometer to heat or cool at certain times.

8.  Buy Energy Star appliances.  (check out www.energystar.gov for a list of products that are available.

9.  Make sure your house is properly insulated.  Make sure all doors and windows have good seals on them. 

10.  Aggressive driving-speeding, rapid acceleration and braking will lower gas mileage.