As tax season rapidly approaches, now may be an excellent time to remind your prospective borrowers of the possible tax benefits tied to homeownership, including certain deductions tied to mortgage interest and rental home expenses.
Mortgage Interest Deduction
Although the incoming presidential administration has suggested implementing tax reform that could impact many homeowners, the well-known mortgage interest deduction will likely remain in effect; however, some say it will be capped.
“We’ll cap the mortgage interest, but we’ll allow some deductibility,” Steve Mnuchin told CNBC on Nov. 29, 2016 after confirming that he had been asked by Donald Trump to head the Treasury Department.
Currently, the mortgage interest deduction is capped at loans up to $1 million if you’re married and filing jointly. If you file separately, the cap is at $500,000. According to CNBC, Mnuchin suggested that the Trump administration would cap itemized deductions at $100,000.
Rental Property Expenses
Other itemized deductions related to homeownership include those associated with rental property expenses. If you’re working with borrowers interested in purchasing rental property, remind them of the potential tax savings through deducting certain qualifying expenses. Some of those expenses may include the following:
- Advertising
- Cleaning and maintenance
- Commissions paid to rental agents/property management companies
- HOA/POA dues
- Insurance premiums
- Legal fees
- Mortgage interest
- Taxes
- Utilities
DISCLAIMER: Keep in mind that we are living in a time of political transition with talk of tax reform. The information in this article may be subject to change. Always advise your borrowers to consult with a licensed tax professional for the most accurate and up-to-date information.
Other Homeownership Benefits
When discussing the mortgage interest and rental property tax deductions with your borrowers, help them understand that these are only small advantages to owning a home. There are many other benefits to homeownership – like building equity and fostering a sense of community. Still, these deductions provide homeowners with a small, but welcome bonus at tax time.
Sources:
https://www.aol.com/article/finance/2017/01/23/the-most-disappointing-aspect-of-trumps-tax-plan-is-what-its-l/21661002/
http://www.cnbc.com/2016/12/01/heads-up-homeowners-mortgage-interest-deduction-on-trumps-chopping-block.html
https://www.houselogic.com/finances-taxes/taxes/tax-deductions-rental-homes/
Photography by [Ai825] © shutterstock.com
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Tags: taxes
