The year 2008 was both a good, and bad, year for home purchases. If you were looking to “flip” a house for quick profit, most likely this was an unsuccessful bet. If you got into the market as a first-time homebuyer for a owner-occupied residence, and you plan to stay there for a number of years, chances are you made a good long-term investment. Whatever the situation, it is important to take advantage of any tax deductions you are qualified to take. We are not accountants or tax attorneys thus you will want to consult with a qualified professional for advice on your individual situation, but here is a list of items that generally are tax deductible in the year that a home purchase or refinance is made:

Mortage Interest. Prorated– and deducted– in the year it was paid.

Refinance Points. When you refinance, the points (if applicable) are deductible on an amortized schedule over the life of the loan. If you have remaining points from a previous refinance, you also may deduct these points in full in the year that the new refi was completed.

Loan Origination or Discount Points. Any points paid for your home acquisition (whether paid by you– or the seller– are deductible in the year they are paid.

Home Improvement Points. Any points paid for a home improvement cash-out transaction are deductible in the year that they are paid.

Real Estate Property Taxes. Prorated– and deducted in the year paid.

Pre-paid Property Taxes and Mortgage Interest. These will be included in the “prepaid” section of your settlement statement, and deducted in the year they are paid.

Prepayment Penalties Incurred. If you experienced any of these expenses they are deducted in the year they were paid or incurred.

Mortgage Insurance. Contingent on your income levels, mortgage insurance on loans originated after January 1, 2007 may now be eligible for a tax deduction.

The tax deductions offered as a result of home ownership are one of the major advantages associated with a real estate transaction, so it is important to be informed and educated.

Readers, have we missed any?

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