Here are just a couple of tips to remember when you either pack up that bulging envelope of receipts, W2s, 1099s and scribbled notes and drop it at your accountant’s door or decide to don the glasses, coffee and late nights and tackle the task yourself.
The American Taxpayer Relief Act of 2012 extends a law that expired at the end of 2011. The law allowed for the deductibility of mortgage insurance premiums, according to a research report from Isaac Boltansky with Compass Point Research & Trading. Now, the law applies to fiscal years 2012 and 2013.
“The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual mortgage insurance premiums,” according to Compass Point's research.
“Certain borrowers with AGIs above $100,000 may benefit from the deductibility as well but are subject to a sliding scale. The tax break covers private mortgage insurance as well as mortgage insurance provided by the FHA, the VA, and the Rural Housing Service. In 2009, about 3.6 million taxpayers claimed the mortgage insurance deduction,” added the firm.
With interest rates remaining low and the housing market in the beginnings of a recovery, many of you may have refinanced or purchased and/or sold homes this past year. If so, you are probably aware that interest on the qualifying mortgage and property taxes paid on the home are tax deductible. However, sometimes other legitimate expenses are overlooked. Points paid to secure the mortgage, whether paid by the buyer or by the seller on behalf of the buyer, are generally accepted as interest and deductible.
Interest to the end of the month shown on the closing statement is qualified interest and it may not show on the year-end statement supplied by the lender. A pre-payment penalty to retire a mortgage or unamortized point not previously deducted may be deducted on the return in the year they were paid.
As always, if you have a question about any of these, you should rely on the counsel of your tax professional who is paid to not only understand the swirling cesspool of ever-changing tax laws but also to actually stay awake as he/she prepares your return.