Are There Income Tax Benefits to Getting a Second Mortgage Payment?

If you get a second mortgage on a new property, you will generally be allowed to deduct the interest on both your first and second home, as long as the loan total is less than $1.1 million. In addition to the second mortgage’s interest rate being tax deductible, there may be other benefits to using a second mortgage. For instance, the interest rate may be lower than the rate for personal loans or credit cards.

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Does owning real property carry any income tax benefits?

Though there are many benefits to owning real property, whether or not there are tax benefits for any particular taxpayer depends on the taxpayer’s overall circumstances. Tax benefits for your primary residence are limited to Schedule A deductions and the occasional energy credits that have periodically been available over the last 6 years. Owning real property enables you to deduct the interest of a home mortgage and a home equity loan from your stated income on your tax forms. However, you have to meet certain qualifications in order to receive an income tax deduction for interest on mortgage payments. Further, these qualifications are subject to total dollar amount limitations. Foreign investors in U.S. real estate must always ensure their investments remain in compliance with federal tax laws.

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Will My Income Taxes Be Affected if I Refinance My Home Mortgage?

Your income taxes may be affected by refinancing your mortgage, but this will depend on whether you are paying any interest in your mortgage payments, and whether you list your mortgage payments as itemized deductions on your tax return. If your mortgage is only several years old, refinancing will often enable you to pay more of the principal of the mortgage through your monthly payments. However, if the interest goes down on your payments, this means that you lose the benefit of deducting this interest from your income taxes.

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Can I Deduct the Points I Pay on Refinancing My Mortgage?

The IRS allows you to deduct the points you pay on refinancing a mortgage from your income taxes. However, unlike buying a home, in which the points paid may be deducted from your taxes that year, the points paid for refinancing a home must be deducted over the entire life of a mortgage.

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