Tax Write-Offs for Mortgages

There are many things that a homeowner can write off to reduce the amount of tax owed each year to the IRS. Here is some detailed information in regards to tax savings that home ownership provides for primary residences as well as any investment properties.

Mortgage Interest

One of the most common deductions for homeowners is the interest paid each year on their mortgages. At the end of each tax year, a lender provides a statement showing all of the interest that a homeowner paid on her property, and she is allowed to deduct that on her 1040. This amount will vary based on the loan type, amount, balance and interest rate.

Points

The points paid on a mortgage will typically reduce the amount of mortgage insurance or mortgage premium on a loan. Normally, this reduction will be about $50 to $100 per month, and this additional fee can be eliminated on the monthly payment by paying points upfront. These points can be deducted on your 1040 each year.

Real Estate Taxes

Property taxes vary greatly from state to state. However, regardless of the percentage points paid toward property taxes each year, homeowners of both primary residences and investment properties can deduct a portion of their property taxes from their federal tax returns.

Business Use

Homeowners who work from home a portion of each day can write off that section of the home as a tax deduction using Schedule C on their income tax return. The percentage of the home used for business is commensurate with the percentage of tax that can be deducted. Also, common household bills, such as phone, Internet and utilities, can be deducted on a percentage basis by homeowners working from home.

Depreciation

Homeowners and investment property owners can deduct the percentage of property depreciation during downturns in the market.

Improvements and Repairs

Any improvements or repairs to a home--whether it be for a primary residence or for investment purposes--can be deducted from federal tax returns. Any improvements that are only cosmetic in nature, however, tend to offer less of a deduction than repairs or improvements that are deemed necessary.