9f90493ef94d2a0916c5e4f14c930df9With the New Year upon us and tax season off and running, it’s time again to devote our newsletter to various tax issues that concern homeowners — whether you own now, recently owned a home or are looking forward to becoming a homeowner. Homeownership still carries some of the best tax advantages available. And make no mistake: Homeownership is all about advantages — for your long-term financial wealth as well as for your housing security, your commitment to community, and your freedom to create on a canvas of walls, floors and landscape.

As you know, tax rules are constantly changing. Unfortunately, a few tax breaks disappeared at the end of 2013 for 2014, but you’ll still want to take advantage of them — if you qualify — on your 2013 federal return, due April 15. Some other tax breaks were modified (see inside), affecting your 2013 return and beyond. The good news is most home-related tax deductions remain as they have been for years. We’ll remind you about them in this issue.

As of this writing, Congress is still wrestling with budget and spending issues that might introduce further changes to home-related tax breaks. If changes occur, we’ll be sure to update you in future issues of our newsletter.

Because of possible changes and since we can’t include every detail in this newsletter about every tax rule that affects every homeowner, be sure to consult the IRS at their website — www.IRS.gov — or at the toll-free IRS tax-assistance line — (800) 829-1040. Other resources for today’s filers are a range of excellent tax-software programs that can guide you, step by step, through your tax return. Of course, having a good tax advisor on your speed dial never hurts (though you may have more trouble getting their attention the closer you get to April 15).

Wishing you many happy deductions!



Deducting Loan Discount Points


For home buyers, deductible expenses include settlement charges for loan discount points. Deductible points are upfront charges for the use of money; think of it as prepaid interest. One point equals 1% of the loan amount. Points paid by either the buyer or seller can be deducted by the buyer for the tax year of the purchase. (Although some closing service fees are quoted as “points,” they are not deductible.) If you purchased a home in 2013, you’ll receive IRS Form 1098 from your lender/loan servicer detailing any points you or the seller paid for your home purchase.

If you paid discount points to refinance your home, you may not deduct them in full during the tax-year of the refinancing. Instead, you must prorate the deduction over the life of the loan. So $3,000 in points paid for a 15-year-term refinancing would equal a deduction of $200 per year ($3,000 ÷ 15 = $200) — unless the home is sold before the end of the loan term or refinanced with another lender, at which time all remaining points can be deducted on that year’s return.

See IRS Pub. 936, Home Mortgage Interest Deduction.

For more information, please visit wwww.cbbaker.com