With tax season coming to an end on April 15th, we’d like to share a few important tips, changes, and information regarding your taxes. The best way to see which deductions you qualify for, are to keep up to date on the ever-changing tax regulations. While we may not see certain changes in deductions and regulations until 2011, knowing the rules and planning to comply with them could help you save thousands of tax dollars this year. Over the next month or so, we plan to organize some useful ideas on managing your taxes into different categories such as tax tips for Homeowners, Businesses, etc. into different posts. First up: Tax Tips for Homeowners!
The tax law gives eligible homeowners a number of tax breaks, but many of the laws are complex and require documentation. Immediately deductible items include prorated real estate taxes, loan origination fees (points), and prorated mortgage interest. The points you pay on a mortgage are deductible the year you make the purchase. You can deduct any points you paid if you meet the following criteria:
- The loan is secured by your primary residence and the loan was used to buy, improve or build the home.
- The points are computed as a percentage of the loan principal;
- The points are clearly delineated on the buyer’s settlement statement; and
- You put cash into your home purchase in an amount at least equal to the points you were charged.
Essentially, property taxes must be apportioned between the buyer and seller based on the number of days each held the property during the property tax year. For this reason, if you buy or sell your home during the tax year it will be necessary to trace your real estate tax payments made at closing to your settlement statement.ï»¿