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DAT Financial & Tax ServiceReal Estate and MortgagesRefinancing and Mortgage Interest DeductionsIf you're planning to refinance a mortgage that you refinanced once before, there may be a tax incentive to complete the new refinancing before the end of the year. If you complete the transaction by December 31, you may be able to claim deductions for certain expenses on your closing statement. If you do a cash-out re-fi, interest expense on amounts over $100,000 more than the balance on your old loan may not be deductible. You also cannot deduct interest on a loan in excess of the home's value. And interest is also limited to a $1 million loan (for joint filers) on a home purchase. Points on a re-fi generally must be deducted over the life of the new loan, while you generally can write off the balance of points you were amortizing from a prior refinance if you refinance with a new lender. Schedule the closing date for any refinancing for a Monday, rather than a Friday. You will save two days of overlapping interest over the weekend since your new lender will start charging you interest on the date the payoff is made to your existing lender and the old lender won't get the funds until Monday! Private Mortgage Insurance (PMI)PMI isn't deductible if you are already paying it with your mortgage payments on a loan that was originated before 2007. However, if you took out a mortgage from 2007 through 2011, you can include the PMI with your interest deduction if AGI limits (generally $100,000) are met. PointsIf you bought a new principal residence and paid points for the mortgage, you may be able to deduct the points all at once in the year paid. The IRS stipulates nine different requirements you must meet to deduct the points in the year paid. I can also help you determine if it's more advantageous to deduct the points over the life of the loan. |
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Dale A. Tartakoff |
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