If you’ve refinanced your home this year, you may be able to reduce your taxes by deducting some of the costs you incur during the refinance. Learn more here.
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Refinancing Tax Deductions: Implications & How To?
Refinancing is the act of getting a new loan, usually at a lower interest rate, for a purchased asset. This generally refers to a new home loan. You may want to refinance to change the type of loan or tap into the equity in your home to fund education, a major purchase, or to reduce debt.
Refinancing & Tax Deductions
A tax deduction is an allowed subtraction from gross income on a tax return. Points paid to refinance the loan are usually deductible over the life of the loan. These points are treated as mortgage interest.
Refinancing a mortgage can save you a significant amount of money each month if you get a lower interest rate or longer term or just change the borrowing in some way to access your equity. However, you can also save some money on your taxes by deducting some of the costs you incur during the refinance.
What part of home loans are and aren’t deductible?
- Mortgage Interest
- (Discount) Points
- Home equity for home improvement or purchase
- Property taxes (total tax deductions are limited to a total of $10,000)
- Most Closing Costs or settlement fees
- Homeowners insurance
Tax deductions can include mortgage interest, points or money paid to set up the loan, and property taxes paid at closing. But not all interest, points or origination fees, or even property taxes are deductible. Be sure you get all you deserve and talk with a trained and experienced tax professional to maximize all of your tax deductions if you have refinanced a mortgage.
Refinance tax implications
- Deductible interest caps – no interest allowed on principal greater than $750,000 for loans after December 14, 2021
- Interest on up to $1M principal on loans Refinancing before Dec 15, 2017
- Standard & itemized deductions
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