Tax Deductions/Benefits: Which are Florida Mortgage Borrowers Entitled to?
At tax time, most homeowners are keenly aware of the big daddy of tax deductions: The interest accrued on monthly Florida mortgage payments, which can amount to thousands of dollars. If you decided to pay your mortgage off early in 2006, as many did, you can also deduct the prepayment penalty fees from your taxes.
Other deductions available to homeowners are less well known. If you use an accountant, he or she will be well-versed on the deductions for which you qualify, as will your real estate attorney, so be sure to consult with either before April 17.
But if you’re like millions of Americans who file their own taxes, take special note of the following real estate deductions:
Fees or “points” paid to obtain a mortgage on your principal residence. Did you buy a home in 2006 and pay the mortgage lender a loan fee, or “points?” Be sure to include this itemized interest deduction on Schedule A. Each point represents 1 percent of the amount borrowed, so if you paid two points, or $2,000 on your home mortgage loan, deduct it.
Uninsured casualty loss or damage deduction. If your home sustained damage because of a tornado, a hurricane or theft and you were not compensated by insurance, you may be able to get a deduction on your taxes. To qualify for this deduction, the total amount of the un-reimbursed damage must be more than 10 percent of your adjusted gross income - less $100 from the un-reimbursed damage.
Fees or points paid when you refinanced. Unlike those fees paid on your mortgage, this deduction is valid over the life of the mortgage, rather than in the year you did your Florida mortgage refinancing.
Capital gains on the sale of a home. Single homeowners can take advantage of a tax-exempt profit of up to $250,000 when they sell their home, as long as the home was the seller’s primary residence for two of the last five years. Married homeowners filing joint tax returns get a break on capital gains taxes on up to $500,000 of the profits from the sale of their home. If you sold rental or investment property last year - or plan to sell this year - and want to avoid capital gains tax, discuss tax-deferred exchanges with your real estate attorney before selling.
Known as a Section 1031 Exchange, the rule requires sellers to trade equally or up in both price and equity for qualifying “like kind” properties within a certain time limit.
Moving costs. If you moved due to a job change last year, your moving costs may be deductible whether you are a renter or an owner. The distance from your old home to your new job must be at least 50 miles farther than the distance from your old home to your old job to qualify. You also must be employed at least 39 weeks during the next 52 weeks in the vicinity of your new job location.
Pro-rated mortgage interest on assumable loans. You can deduct your share of pro-rated monthly Florida mortgage loan interest if you bought a home and took over its existing mortgage payments from the prior owner.
Private mortgage insurance. Legislation passed earlier this year allows some homebuyers to deduct the cost of private mortgage insurance - for those buying homes this year only. That means, the deduction is only available for 12 months for the 2007 tax year, so be sure to make a mental note for next year’s taxes.
