Mortgage Loans, Rates, Home Buying, Selling, Foreclosures » deduction

Real Estate: Will Mortgage Interest Write-Offs Be Reduced?

Peter G. Miller — Tue, 08 Sep 2009 11:00:45 +0000

The Congressional Budget Office has come out with a report showing 66 ways to raise money for the federal government. This sounds like dull and boring stuff until you get to Option #7: Reduce the Mortgage Interest Deduction or Replace It with a Tax Credit.

Ugh. You can see where this is going.

“The first alternative would reduce the maximum mortgage eligible for the interest deduction from $1.1 million in 2012 to $500,000 in 2018 by annual decrements of $100,000 each. That change would boost revenues by only $400 million in 2013 but by $41 billion over 10 years. The $500,000 cap would affect more homeowners in later years as incomes increase and housing prices rise.

“The second alternative would replace the deduction with a 15 percent tax credit for interest on mortgages below the declining limits in the first alternative. (In 2005, the President

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Is the interest on 125 percent financing deductible?

Peter G. Miller — Sun, 31 Aug 2008 11:38:38 +0000

This is a somewhat complex question.

Interest on loans secured by real estate is generally deductible if the acquisition mortgage value is not more than $1 million. Interest is also deductible for home equity loans (second loans) up to $100,000.

With 125 percent financing you have a loan that is worth more than the house — big trouble if you need to sell. In terms of taxes, the amount above the value of the property may be regarded as “excess” mortgage. The “excess” amount may be taxable when the home is sold.

Also, interest on that portion of the financing which tops the property’s fair market value may not be a write-off.

Please speak with a tax pro for details.

Is the interest on 125 percent financing deductible? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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How Much Can We Borrow With Home Equity Financing?

Peter G. Miller — Fri, 29 Aug 2008 09:24:07 +0000

In general terms, “home equity” is the difference between what you owe on the property and what it’s worth in the marketplace. Example: you have a $75,000 loan balance and the property is worth $125,000, your home equity would be seen as $50,000 by most lenders. The $50,000 figure is not real, however, because if you sell your equity would be reduced after marketing expenses and closing costs.

But, suppose that a lender will provide a loan equal to 90 percent of your equity. Ninety percent x $125,000 = $112,500. That figure, less the $75,000 remaining loan balance, means the lender would be willing to provide a home equity loan or a home loan line of credit equal to $37,500.

Different home equity programs will offer different percentages and loan amounts. For details, check with local lenders.

Be aware that it is possible to borrow against a prime residence in such a manner that not all interest is deductible, generally when the value of all financing exceeds remaining acquisition debt by $100,000.

Example: You bought a home for $175,000 with a $150,000 mortgage. Ten years later the original mortgage has been reduced to $125,000 and you refinance for $250,000. In this example, interest on as much as $25,000 may not be deductible ($125,000+$100,000 = $225,000. $250,000 less $225,000 = $25,000).

For details, please see lenders and accounting professionals.

How Much Can We Borrow With Home Equity Financing? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Can I deduct moving costs?

Peter G. Miller — Thu, 28 Aug 2008 15:07:12 +0000

In some cases, yes. If your new job site is at least 50 miles further than the old one (that is, if you current work is 5 miles from home, the new workplace would have to be 55 miles from your old home), and if you work at least 39 weeks during the first year at the new location, then you may be able to write off such costs as moving household goods, lodging (but not meals), tolls, etc.

If you are self-employed you must work 78 weeks during the first two years after the move, including 39 weeks during the first year.

For details, check general IRS information, obtain form 3903, and review with a tax professional.

Can I deduct moving costs? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Should We Buy Property For The Tax Write-Offs?

Peter G. Miller — Thu, 28 Aug 2008 12:33:46 +0000

No.

Property should NOT be bought for tax purposes alone. If properties are not now appreciating or producing a positive cash flow, then tax write-offs will hold little worth.

If properties are now losing money each month but can be turned around on a reasonable basis, say by making improvements that lead to higher rents or a greater market value, then the story may be different.

Should We Buy Property For The Tax Write-Offs? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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What are the major tax benefits of homeownership?

Peter G. Miller — Wed, 27 Aug 2008 00:09:21 +0000

In terms of federal taxes, you will generally be able to:

___Write off interest costs on acquisition financing with a principal balance of up to $1 million.

__Write off interest costs on a second mortgage or home equity loan with a principal balance of up to $100,000.

___Write off property taxes on your personal residence.

___Write off up to $500,000 (if married, $250,000) in profits when you sell a prime residence that you have occupied for two of the past five years.

___If you have not previously owned property, it is likely that you will switch from a standard deduction to an itemized deduction when you become a homeowner. It is probable that this switch will allow you to take some write-offs that are not now available with the standard deduction.

While the items above are general benefits, the actual rules can be complex. Press here for an overview of taxes, mortgages and real estate. For details, please see a tax professional.

What are the major tax benefits of homeownership? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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