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Tag: Tax

How To Claim The Discount Points On Your Income Tax Return

Internal Revenue Service (IRS) allows the deduction of the discount points on your income tax return. Discount points which are one of the most important tax deductions to homebuyers are paid upfront to reduce the mortgage payment.

Calculate the Discount Points

Each point equals one percent of the principal. For example, a 2 discount points on $150,000 mortgage comes to $3,000 ($150,000 x 0.02). The Closing Statements shows how much is your discount points. If you do not see discount points, have no fear. Discount points are also called Loan Origination Fees, Maximum Loan Charges, or Loan Discount.

First Time Homebuyer Discount Points

For a first time buyer, IRS allows to claim the full amount of discount points on the year paid. For example, Joe bought his first home on 2005. In his closing statement, the discount points come to $3,000. Joe claims the full amount on Schedule A of … Read More

Tax Deductible Capital Improvements On One’s Home

Many home improvements are capital improvements. The Capital Improvements are tax deductible according to IRS if the home improvements meet a number of conditions. The home improvements are permanent addition to the home that increases the value of the home. Hence, the home improvements are substantial in which the value of home property appreciates, the life of home property prolongs, and the functionality of home property increases.

For example, placing a fence, adding a room, installing a driveway, implementing a swimming pool, installing a new roof, setting a new built-in heating systems are capital improvements.

The capital improvement increases the value of your home. For example, adding a new room increases the value of home. The new room increases the ability of the property to earn more income. Thereby, the value of home property increases as well.

Another example, adding a garage increases the value of home. Renters will pay … Read More