Most are pretty straightforward. But I did not know these two:
Points – Any points that you paid at closing to lower the interest rate on your mortgage are deductible. Generally, the deductions must be amortized over the life of the mortgage, but there are circumstances where you may be able to deduct the entire amount of your points paid in the year of purchase. See Publication 530 for details.
Mortgage Interest Credit – Typically, mortgage interest is taken as a deduction. However, if you have a qualifying low income, you can claim mortgage interest as a credit instead. This subtracts the total directly from your tax bill instead of from your taxable income used to determine your tax bill. To claim this credit, you must have received a qualified Mortgage Credit Certificate from a suitable state or local agency. File Form 8396 along with your tax form to claim your credit.
While it would be nice if we could offer nothing but good news and credits for homeowners, we should also offer some fair warnings for those who aren’t in great real estate shape.
If you are planning a short sale on an underwater property, be aware that any cancellation of debt is considered income. That can be terribly burdensome. Consider, for instance, what might happen if you owe $250,000 to your mortgage lender and short-sell your home for $150,000. That leaves you with a whopping $100,000 you have to report as income – and that means you’re going to have to pay taxes on it.
Foreclosures work a little differently; if you’re personally responsible for the entire mortgage, you’ll also be responsible for the cancellation of the debt. Congress has yet to renew the Mortgage Forgiveness Debt Relief Act, which expired in 2013 and allowed some qualified taxpayers to exclude debt from their taxes.
No problem. I have a program that allows you to get the $ from the capital gains you should have paid to uncle Sam. You defer that payment for 30 years using an unsecured loan. You end up a winner, instead of a whiner.
