Mortgage Tax Breaks

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Uncle Sam encourages homeownership by American taxpayers – apparently with considerable success. For many, the deductions and other tax benefits that come with owning a home are a major deciding factor in buying a home.

Mortgage Interest Deduction

The biggest homeowner tax break for most people is the mortgage interest deduction, taken on Schedule A, Form 1040. You can generally deduct the interest portion of your monthly mortgage payment with your other itemized deductions.

Mortgage interest is generally interest on any loan that is secured by your home or second home. If you took out a loan to buy or build a home, you refinanced a mortgage, or you took out a second mortgage or home equity line of credit, the loan is generally secured by your home.

Main Home

There's not usually much doubt which home is your main home. That's generally the home where you receive your mail and spend most of your time. Your second home can be a house, condo, mobile home, motor home, or even a boat, as long as it has sleeping, cooking, and toilet facilities.

If you have more than one second home, you can only deduct mortgage interest that you incurred on one second home at any given time during the year.

If your acquisition mortgages on your main home and second home together are less than $1 million ($500,000 if you are married filing separately), your deduction is not limited.

However, if you took out your mortgage after October 13, 1987, and your total mortgages are over these limits, you can only deduct your interest expense on the balance of your loans up to the limit.

Home Equity Line

If you have a home equity loan on your home, you can only deduct the interest on up to $100,000 ($50,000 if married filing separately) of the balance, or the total of each of your home's fair market value reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. This should be calculated as of the date the last debt was secured by each home.

Home Purchase or Refinance Points

You can deduct points when you purchase or refinance a home. Points are the amount you spend to bring down your interest rate on the loan. They are based on the amount you borrow – one point equals 1% of the amount of the loan.

When you buy or build your home, you can deduct the full amount of points you pay in the year you pay them. If you pay points when you refinance, you deduct the points over the life of the loan.

Real Estate Tax Deduction

Real estate taxes are another major expense for homeowners – but they can also be another important tax deduction. If you pay your real estate taxes with your mortgage payment, you deduct the real estate taxes your escrow company actually pays on your behalf, not the amount you pay into the escrow account.


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Upcoming Tax Dates

September 7 Everyone
Federal Holiday (Labor Day) - Details

September 10 Employees who work for tips
If you received $20 or more in tips during August, report them to your employer - Details

September 10 Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the first 15 days of August.

September 14 Regular method taxes
Deposit the tax included in amounts billed or tickets sold during the last 16 days of August.

September 15 Individuals
Make a payment of your 2015 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment - Details

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File a 2014 calendar year income tax return (Form 1120) and pay any tax, interest, and penalties due. This due date applies only if you timely requested an automatic 6-month extension - Details

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If the monthly deposit rule applies, deposit the tax for payments in August.

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September 29 Communications and air transportation taxes under the alternative method (special September deposit rule).
Deposit the tax included in amounts billed or tickets sold during the period beginning September 1 and ending September 11.

September 30 Wagering tax
File Form 730 and pay the tax on wagers accepted during August.

September 30 Heavy highway vehicle use tax
File Form 2290 and pay the tax for vehicles first used in August.

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