Am I missing out on some tax deductions on my house? Any suggestions?
Here are 4 ideas:
- Although PMI (Private Mortgage Insurance that is included in your mortgage payments) is currently deductible as interest, the special tax provision that permits this deduction may expire. I believe PMI is deductible as mortgage interest in addition to your regular mortgage interest regardless of the special tax provision. Per a well-reasoned treatise on the issue in the New York University Law Review and legal analysis in Tax Notes, PMI fits the legal definition of interest because you pay it for the benefit of your lender and because it relates to the size, term and risk of your mortgage. therefore it is deductible as mortgage interest.
- Some of the fees you paid as paid as part of the closing process on a refinanced mortgage should be deductible as interest expense. These fees include mortgage lending fees other than points (loan origination costs) which may be amortized over the term of the mortgage. On your tax return, treat these fees as mortgage interest not reported to you on Form 1098 (the mortgage interest form the mortgage companies send to you after year end). The Federal Truth in Lending Act requires mortgage lenders to disclose and treat these fees as additional interest in their report to you of the highest interest yield spread on the mortgage. They do not, however, report this additional interest on your Form 1098.
- If you have an office in the home, you capitalized (included in your house purchase cost) many of the closing costs. The capitalized closing costs from your original house purchase attributable to your home office may be deducted in the year of refinancing less the depreciation taken on those closing costs.
- Texas residents: Sold a house in the past year? Don’t forget to deduct real estate taxes for the part of the year that you still owned the house. Your share of that year’s real estate taxes will be reported on your settlement statement (HUD-1 form).