Home Mortgage Interest Deduction | Buying A House In Maine
Home mortgage interest deduction, buying a house in Maine offers big tax benefits.
Lots of positive reasons to stop renting and start owning a Maine home. But reducing your taxable income bottom line using the mortgage interest deduction on an itemized tax return. That is definitely the cherry on top of any home ownership advantage list.
This blog post explains mortgage interest deduction as outlined in IRS publication 936.
Anyone claiming the home mortgage loan interest deduction needs Form 1098. The local bank lender holding the mortgage on your home sends you how much you paid in interest expense during the past tax year. The same information gets relayed to the IRS to make sure all the numbers on your tax return deducting the mortgage interest expense are indeed the correct numbers.
The cut to the chase down and dirty on home mortgage interest deduction highlights.
If your interest deduction is on your main home mortgage …
1) The collateral for the loan is your home.
2) The home has sleeping, cooking and toilet facilities.
3) The property can be a house, co-op, apartment, condo, mobile home, house trailer or a houseboat.
4) The “buy out” mortgage from ex-wife or ex-husband after a divorce dust settles counts.
5) Non-taxable housing allowance military or ministry situations can still allow home mortgage interest deduction.
Being able to deduct the interest expense on your home mortgage, one more good reason to slide, no jump off that renting fence. Home ownership is the way to roll. Renting is for the birds.
Maine homes are very affordable and the supply across all the price ranges is healthy in this mostly small population rural community state.
Claiming the mortgage interest deduction is more dramatic the higher the price tag of whatever home you buy. But saving any money to keep in your pocket and not share with the IRS is just the Yankee ingenuity way of a frugal Mainer. I think the expression is “don’t leave money on the table.” If you can stop renting and have a bank ready to give you a hand out of the rent rut with a home mortgage, let’s go. Find that starter home first time home buyers and work your way up the housing ladder. More on getting a mortgage on a Maine home.
There are some strings attached and rules to abide by to take your mortgage interest deduction. Like most things in life, fine print needs to be studied to make sure you comply as a tax payer settling up quarterly or annually with the IRS rules and mandates. The home mortgage interest deduction is for the first $1 million dollars of debt. This is for your primary or second home and you can deduct the interest up to $750,000 of the mortgage. This twist applies if the main or vacation home was bought after December 15, 2017.
The mortgage interest deduction has been tightened up a lot.
I remember the discussion at the last several State Of Maine REALTOR Association meetings about if the interest deduction on home mortgage legislation was likely to pass or not. Realtors across the land feel it is very important to keep it. With the same vigor of those about gun rights, freedom of speech and any other hot button topics. The IRS decided with the help of new taxation legislation a while back wanted to weed out the several second homes and all those mortgages with interest to deduct. One second home they figured was enough of a income tax lowering perk for the mortgage interest deduction option.
This all brings up a good point about second, vacation homes and whether you are allowed a mortgage interest deduction or not. Here’s the test on that yes or no, in or out.
1) Yes, the house must be collateral for the loan.
2) No, you don’t have to use the home during the year.
3) If the second home is rented out, you must be there more than 10% of the time of when it is leased out. You the owner need to be using the place at least 14 days or more than 10% of the days you hang out the shingle to have it rented to others.
Anything else besides the home interest mortgage expense deductible on the financing ends of things?
Mortgage insurance premiums, whatever you pay for private mortgage insurance, the VA funding, USDA loan guarantee fees. Those along with FHA mortgage insurance premiums are deductible. The catch? You can not deduct mortgage insurance costs if your adjusted gross income is over $109,000. That’s figure changes to $54,500 for a limit if married but filing separately.
As always, remember what the IRS forms look like on anything you study to see if you can use the deduction. What you itemize on your income taxes should be run by a qualified accountant or CPA.
I am a Maine real estate broker and don’t pretend to be a bean counter.
Never played a CPA on television or in the movies. The eyes can gloss over with too much number mumbo jumbo talk. But it’s pretty important to take all the end of the year deductions to improve your annual bottom line for whatever you owe or expect to get back with good planning.
You can not deduct title insurance on the property being mortgaged on your income taxes.
Even if the bank requires it, that’s between you and the lending institution. The IRS does not allow most of the settlement costs as deductions. None of the home owner’s insurance or any extra principal payments made on your mortgage. Write the check, don’t take the IRS deduction.
Please study the IRS article publication 936 pdf linked above in this bog post to drill down into the topic as far as you want to go.
Or better yet, tap the numbers to have a little talk with your CPA financial tax planner.
You will get a Form 1098 the first of the year from your bank mortgage lender if you paid $600 or more of home mortgage interest expense during the year.
Here’s a mortgage tax deduction calculator to play with the numbers you run.
The toying around with the mortgage interest deduction started with the 2017 Tax Cuts and Jobs Act. Not all economists like the mortgage interest deduction. How come? Some argue that are not the home owner taking the deduction that it leads to more expensive houses with larger square footages and heating hills to go along with them.
Another complaint is that the mortgage interest deduction hurts the lower and middle class home buyers who see the affordable housing stock disappear. Maine is mostly small towns, rural
countryside and affordable housing is not an issue. You don’t worry about sprawl, city planning or where to put the turnpike cloverleaf or a hundred lot subdivision coming in across the road in rural Maine.
I think the mortgage interest deduction is a good thing for Maine and helps stretch those dollars to put them into the local economy where a dollar turns over six to seven times.
Rather than e-filing it down to a income taxation filing center. In small town Maine we don’t like debt, try to retire it as quickly as possible for the free and clear. Debt can be a cancer but a necessary evil when you don’t want to rent and need to start owning, building equity in your home. Just did a blog post on what’s it like to be a first time home buyer in Maine on the hunt for a house. Hope you can tap into the posts for something to benefit and save money, time, frustration.
Houlton Maine, Southern Aroostook County is loaded with lots of low cost, affordable houses.
The money needed to buy them is small and insuring the sticks and bricks is low to the ground too. The money needed for quality of life is not big because we are lucky to already live in Maine. We don’t have the long trek to get here and leave. We get to enjoy all the four seasons natural beauty Maine offers day in and out. All this space, low crime, no traffic. Looking for that? Is it like that where you live now?
Thank you for the time to read article! Let us know other topics you would like to be sliced and diced! The 41 years of real estate listing and selling property has taught us a lot to share. Being a native, living here all my life helps me provide you a lot of insider, time saving information. MOOERS REALTY is here to help you buying, selling, trading real estate in Maine! Hope this blog post on home mortgage interest deduction helps answer some of the questions you had.
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