Tips On Mortgage Interest Expense Deductions
Find Tax Deduction Tips For Mortgage Interest Expense
Mortgage Interest Expense as tax deductions need to be understood by Tucson Home buyers or Home owners. Understand how to treat the interest deduction for Federal tax proposes for mortgage loans and home refinancing decisions.
There are 3 classifications of interest for an individual Federal tax return and each is subject to different rules.
Personal interest – which has two components
Interest on a qualified residence.
Interest on consumer debt.
- Investment interest
Business indebtedness interest
Interest on rental income real estate
The fees and charges incurred as part of the mortgage loan funding must be analyzed and ultimately organized into two categories.
1 – Costs that do not quality as interest.
These are usually lending service costs on mortgages used to acquire real estate held for personal use.
Should the mortgage be obtained to acquire real estate used in business or held for profit, the costs are deductible by amortizing them over the life to the loan.
2 – Costs that do qualify as interest.
Those costs qualifying as interest are treated as prepaid interest. These costs are capitalized and amortized – on a straight line method – over the life of the loan. Generally, points, loan origination fees, premium changes, etc. are considered prepaid interest and amortized over the life of the loan.
This information on Mortgage Interest Expense is intended to provide a general background on the subject of interest deductions for personal tax considerations. While it is believed to be accurate, it does not cover all issues related to this subject. Also, mortgage interest rates will be effected by your FICO credit score. Know what yours is and how you can improve it.
The information provided isn’t meant as a substitute for advise from your CPA, professional tax adviser or attorney. You should always consult with your own financial and tax advisers to discuss such matters.
It is also important to understand the terms Prequalification vs Preapproval BEFORE starting your home search process. Also, your lender will provide a Good Faith Estimate will be issued within 5 days that your loan is “locked”. Review it carefully, it will show all the costs to be incurred to obtain your mortgage.
Questions about the Tucson Real Estate Market or Tucson Homes for Sale? Call Us - 520 940 4541 OR complete the - CONTACT FORM - and we will get right back to you!
Questions about the Tucson Real Estate Market or Tucson Homes for Sale? Call Us 866 316 5575 OR complete the CONTACT FORM and we will get right back to you!