Home Financing Ninja

Tax Deductions for New Homeowners in Florida

This morning I saw a post from a fellow real estate professional in Maryland discussing whether origination points were legitimate income tax deductions for new homeowners in the United States

So it got me thinking, how many of us know what real estate related costs are tax deductible.  I know that when I bought my first home almost three years ago (in four days), I had to learn a lot really quick, especially when it came time for taxes to be paid.

So here is a list that is not by any means complete, but should get one's thinking juices flowing

Origination Points:  These are common source of tax deductions for new homeowners in Florida.  To qualify, the point must be expressed (shown) as a percentage, not flat fee.  They are put on Schedule A if the buyer is not renting the home.  If so, then put it on Schedule E.  However, typical for refinances, origination points can be deducted if you take the cost of the point and amortize it over the life of the loan (ie - more trouble then it is worth)

Discount Points: Second most common source of tax deductions for new homeowners in Florida along with refinance transactions.  The cost again, must be "expressed as percentage" and not as a flat fee and must significantly give you a lower interest rate

Mortgage Insurance Premiums: Any qualified mortgage insurance premiums (including the financed portion for FHA loans, known as the UP Front MIP), any amount set up in an escrow account (deposited with lender).  But don't forget the amount that you pay monthly with your mortgage payment also.  IRS Rules for Tax Deductible Mortgage Insurance Premiums is a good place to go.

HomeOwners Association Fees (HOA Fees): Prorated from the settlement statement, these are not tax deductions for new homeowners in Florida.  However, what you pay during the year (after purchase) is deductible.  Put it on Schedule A.

Prorated Assessments (Taxes, HOA Fees):  These are not legitimate tax deductions for new homeowners in Florida as they only decrease the amount of money you are bringing to the table to close the loan and get your keys.

Mortgage Interest: Now most of us know that the interest portion of a mortgage payment is the BIGGEST tax deductions for new homeowners in Florida.  Now remember, this homeowners tax deduction is true even if you have seller financing, that is to say, you pay the payment to the person who sold you the house.

However, the IRS gave me some new and interesting facts that an hour ago, I did not know.  Included under the mortgage interest deduction are such items as:

• Prepayment Penalties
• Home Improvements for Health Reasons (if you have to bring money to the table)
• Prepaid Interest
• Ground Rents (aka lot rents)
• Late Payment charges as long as "it is not for a specific service in connection with your mortgage loan" (Source: IRS.GOV website)
  

Sales Taxes:  I would think sales taxes refer to doc stamps, intangible taxes, and deed stamps.  At least, that's what I did three years ago.  I even got audited last year and the IRS said nothing. So again, this might be an overlooked tax deductions for new homeowners in Florida but check with a tax professional in Florida to make sure that you get the most homeowners tax deductions.

I get a lot of questions from people who are looking to buy a home but are down payment challenged.  There are three great programs out there for zero down payment home loans in Florida.

However, if you have money in a deferred retirement account (401k, 403b, etc) you can take out up to $10,000 per person (so 20,000 if a couple from a joint account or two separate accounts).  Now, here is the mistake commonly made.  That 10k is counted as income, and you do have to pay taxes on it - But you don't have to pay the penalty tax if you are buying a primary residence

If I can help, please let me know!

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