More articles from Credits & Deductions
You didn’t think you would be able to buy a home after striking out on your own and becoming self-employed. Yet you were determined enough to make it happen. While the future can eventually lead you to bigger and better things down the road, you are happy to take your time and build up the business. The only thing you don’t look forward to is paying taxes.
It is a huge chunk of change you have to pay to the IRS for being self-employed. Yet there are a few tax breaks right there in front of you that you may not even be aware about. Did you know that you can deduct your mortgage points from your taxes?
When you go to get a loan for your home, the lender will evaluate your income and other factors to determine if you qualify for a mortgage loan and what rates they can offer you. A mortgage point is the charge added to the overall costs when the lender secures the actual loan for your home. On loan papers, mortgage points are usually called “loan origination fees” or “origination fee.” A lender charges these points to make more of a profit, as you will pay these points in the effort to get a lower interest rate.
The IRS looks at mortgage points as types of mortgage interest that you paid in advance, and are fully deductible during the year you paid them. This means that you can actually deduct mortgage points when you pay your taxes. So long as the mortgage points meet the following requirements, you can find yourself getting a great tax break.
You will need a 1098 statement that the lender sends to you, as this document will show the number of points you paid as well as the paid mortgage interest. You should receive the form in January from your lender. You will also need IRS forms Schedule A and Form 1040 (not 1040A or 1040EZ as you can’t deduct mortgage points on these forms).
In this day and age, any tax break that you can get is a wonderful thing. So don’t forget to deduct your mortgage points from your taxes.