Tax Benefits: What You Should Know
No one likes to hear about taxes. The word makes most people
grimace, and conjures images and thoughts of dreadful math,
record keeping and never ending paperwork. However, if you
are talking about tax benefits, you will probably get a more
positive reaction and, perhaps, even a smile.
You should definitely be aware that one of the greatest parts
of owning a home is the equity you gain, the tax breaks you
receive, and some specific deductions from your income tax
that you would not get if you were only a renting tenant.
When taking homeowners’ deductions, you will need to
be familiar with the form and where to put what. You will
have to file a 1040 form and itemize your deductions in the
A schedule. You can only take itemized deductions or standard
deductions, so you will probably want to choose which will
benefit you more. A tax advisor can help you decide if you
are not sure or do not have enough information.
If you are a homeowner, you can deduct any interest that
you have paid for a home loan. This includes home improvement
investments, home equity loans, and first or second mortgages.
You can only deduct for two residences for which you have
held mortgages. You cannot deduct for business properties
or properties you rent.
If your mortgage was over $1 million, you may not be able
to deduct the interest. Your mortgage cannot exceed $500,000
if you are married but filing on your own. If you have home
equity, you can deduct for interest that does not exceed $100,000,
or $50,000 if married and filing separately. Your loan-to-value
ratio cannot be more than 100 percent, meaning you cannot
be receiving more money than the residence costs. Also, ask
a Chase lender for a year-end interest statement, also known
as a 1098 form.
If you own real estate of any kind, you will receive a deduction
on property taxes. Each year, an appraiser will come and declare
the value of the property. The more valuable or costly your
property is determined, the more tax returns you will get.
Keep in mind values change from year to year, depending on
the market. You will pay between one and three percent of
the market value in annual property taxes.
You can also receive discount points, which are paid prematurely
in order to have a lower interest rate and more deductions
come the end of the year. To do this your home cannot have
a mortgage more than $1,000,000. If you are using points to
deduct from a refinancing loan, the deductions will be taken
throughout the course of the loan.
Closing costs and homeowners’ insurance cannot be deducted
from your taxes. Cost of utilities, real estate commission
and home inspection or appraisal fees will also not be deducted.
Also, if you are concerned about how much you will pay in
taxes for selling your home, you will be relieved to know
that there are many opportunities to dismiss these taxes.
Talk to a Chase employee or contact a local tax advisor for