Tax time is upon us—April 15th is right around the corner and it’s important that you have all of the information you need to file your 2009 taxes. Start gathering your documents now, if you haven’t already done so. Compile a list of items you needed for your 2008 return or ask your tax professional for a checklist. Make a file for all your receipts, canceled checks and other documents that support an item of income or a deduction. All 1098’s, 1099’s and W2’s will be needed.
If you closed a loan with 1st Advantage in the previous year make sure to have your HUD-1 closing statement. Though you should receive the 1098 statement before the end of February for any pre-paid interest and points you might have paid at the time of closing, it is also helpful to also have your HUD-1 settlement statement handy. Feel free to call your 1AM Loan Officer who can provide it to you.
Organization is the key to filing an accurate return. After all, certain statistics show that 1 out of every 97 returns gets audited so you can never be too careful. If you are filing yourself make sure to triple check all the information. According to the IRS, One of the most common mistakes on a tax return is bad math.
To get your refund faster e-file and use direct deposit. By doing this you will get your money in half the amount of time it takes if you file a paper return.
Frequently Asked Questions
Can I deduct the sum of my monthly payments for the year on my income taxes?
You can only deduct the interest portion of your payment. This includes interest paid on mortgages to buy, build or substantially improve your first or second home. Money paid to principal cannot be part of your deduction.
I’m married but we file separately. Who gets the deduction?
A taxpayer can deduct interest he or she pays on a mortgage if the tax payer is the legal or equitable owner of the property. Once married, ownership rights and their tax treatment when filing separately can get complicated. If a home is owned jointly, each spouse can deduct half the interest payments.
I usually pay my January payment late in December; which year’s taxes gets this deduction?
If you make your January payment during the month of December, it can be applied to the earlier year. However, your statement from your lender showing your total interest paid for the year will not reflect this payment. You will need to deduct your correct amount on your income tax statement and attach a short letter to the lender’s statement explaining why their calculation is incorrect.
Can I deduct my homeowner’s association assessment?
No. This payment, which includes insurance on the building as well as general maintenance for common areas, is not an income tax deduction.
How does my inheritance or gift money used for the purchase of my house factor into my income taxes?
Money from inheritance or from a gift that goes directly into a real estate transaction is not subject to taxes. There is no financial gain for you as the recipient other than the purchase of your home, which is already acknowledged by the government in your taxes when you sell your home.
How do I know if I’m eligible for a real estate tax deduction?
If you pay real estate taxes on the property you own, your real estate taxes are fully tax deductible, whether they are imposed by state, county, city, township, or some other local government body. As co-owners, you can deduct the amount paid in half. If you pay taxes for someone else, such as a relative for property you do not own, you do not get that deduction.
Am I able to deduct my transfer stamp payment along with other fees paid at my closing?
No. You are only allowed to deduct origination points and prepaid interest, not other lending, title or transfer stamp costs. You are, however, able to deduct these amounts from your capital gain when you sell your property. (Please see your accountant for further details on these questions (i.e. how to fill out an itemized form).
Using your home to your advantage
Write-Offs to Remember: Deductions in the Loan Process
Write-offs. There are many write-offs when you are a homeowner, many of which people often forget.
Make the most of your write-off’s—take every break the IRS says you’ve got coming. Here are a few deductions that people often forget:
Loan fees (aka, points) If you closed a loan this year and ended up buying some points, the good news is they’re a total write-off. Whether you’re buying a new home, refinancing the one you already own, or just borrowing to do some home improvement, you can take your “points” right off the top.
Pre-payment penalties. If you happen to get charged a pre-payment penalty remember that you can itemize it as a deduction on your return.
Pro-rated real estate taxes. Even if the seller was the one who sent the tax collector the check, chances are you paid a pro-rated portion of the taxes for the year at closing. Be sure to deduct your fair share.
Pro-rated mortgage interest. Depending on when in the month you closed on your house, you paid an amount of pro-rated mortgage interest for that month. Big or small, you can write that off. The HUD-1 closing statement will show you how much you’re due.
Home construction loan interest. As long as the construction period doesn’t last more than two years before you make the new place your “principal residence,” you can write off the interest for that construction loan.
It pays to pay attention—all these write-offs can add up to some serious savings when tax time comes around. You can also qualify for free tax preparation and e-filing if your adjusted gross income was $57,000 or less in 2009. For more tips logon to www.irs.gov or consult a tax professional.
PMI (Private Mortgage Insurance) Congress has extended tax deductions for homeowners paying private mortgage insurance through 2010. But to qualify for the deduction you must have bought or refinanced your home since Jan. 1, 2007. Families with adjusted gross incomes of up to $100,000 can deduct 100% of their insurance premiums, much the same as they deduct property taxes.