The Tax Man Cometh
Christiansburg, Va. – Homeownership offers many benefits, but this time of year, one of the most attractive is the ability to deduct the mortgage interest paid each year from a homeowner’s taxable income. It is a deduction that can yield huge savings for homebuyers, and help the chances of getting a refund, says CHP Homeownership Specialist Ryan Stenger.
For new homeowners the savings can be especially great because standard monthly mortgage payments typically go more toward interest than principal in the beginning years of a loan. “The deduction is there for the claiming, but homeowners need to follow the Internal Revenue Service (IRS) requirements for realizing these savings,” advises Stenger.
Stenger explains that in order to claim this deduction, homeowners must report all the mortgage interest paid in during a given tax year, which means getting the right documents together in advance. He offers a few tips that can help:
• Before filling taxes, gather two important documents to assist you in completing your tax returns-- Form 1098 (the Mortgage Interest Statement) and the HUD-1 Settlement Statement, if the home was purchased during the tax year.
• The 1098 form is mailed to you from your lender and contains the total amount of deductable interest you may claim. It usually arrives in the mail at the same time you are receiving your W-2 statement from your employer.
• The HUD-1 Settlement Statement may require some digging through your original purchase paperwork, but it can usually be found in the pile of closing documents provided on closing day. If you can’t find your HUD-1 Settlement Statement, call the settlement agent or attorney that handled the closing—they should be able to provide you with a copy.
Tax season is not the most popular time of the year, but by taking a few simple steps to get organized, it can be a little brighter for a new homeowner.