A great benefit of homeownership is receiving the many applicable tax deductions. Those who have taken a home mortgage can deduct their mortgage interest payments. In addition, if you are late on a monthly mortgage payment, you will likely get charged a late payment fee and the late fee is also tax deductible. If your property purchase comes under the category of a 1031 property exchange, you are exempt from paying tax on the capital gains of the property.
You can also make tax deductions on the loan points charged to you when you receive a home mortgage. One point is one percent of the principal loan amount. In the case of home loans, one to three points are normally charged and in terms of tax deductions this can add up to thousands of dollars, which can prove to be a good savings for you. If you are refinancing your home, points paid to the lender for refinancing your home are also tax deductible if they are amortized over the loan lifetime. If you have taken a home equity loan and used the money to make considerable home improvement, the interest paid on the equity loan is also tax deductible.
Tax deductions are specific to state laws, and they constantly change, so it’s best to consult a qualified property tax auditor who can show you the various ways to deduct taxes. Tax deductions are offered by the government to encourage people to buy property and are just one more benefit of homeownership. By looking for ways to reduce your taxes, you can free up money for other crucial expenses. On the other hand, being unaware of tax deduction benefits may mean that you lose out on financial savings.
CleoCATra
January 28, 2010 at 1:21 am
You are kidding, right? You have a big debt pressure and own two homes, either of which are in a supposedly good market and you are wondering what to do? SELL the vacation house, now! If you seriously are wanting to sell both and move, the opportunity to do so is not going to get any sweeter for quite a while.
Sorry to be dramatic, but there are things going on with credit, home values, and value of money. Get out now, while the getting is good, and take advantage of what is still an advantage.
popalock85
January 28, 2010 at 2:34 am
That's how I have done, but on a much smaller scale than Donald Trump. If you have cash use that first, if you use an equity line you pay the interest.
Investment property loans charge more interest. You want to try to maintain an 80% or less debt to value on all you propeties. If you go over you will have to pay more for the loans. Try to do this for your current residence too, in case you want to refi.
Loans are getting cheaper, check with your bank. They may have a refi option that will allow you the cash you need at a better deal than an equity line.
When you buy if you do multiple deals at once you credit won't reflect the other homes you are trying to purchase. This will make you look like a better risk to the bank. Make sure you don't bite off more than you can chew.
Another bit of advice, don't buy a fixer upper and plan to improve it to gain value, not on your first endeavor anyway. Time is money, buy it and rent it out as quick as you can. Expect your profit in the future value of the home. Don't expect much/any profit from the month to month rent check. Think of it as investment, not a continual source of income.
Skye
January 28, 2010 at 8:44 am