10 Mortgage & Property Tax Deductions

Author: Mohamed T Gulamali

​Below i'll cover:

1. Year After Year Tax Deductions
2. One Time Tax Deductions
3. Benefits
4. Charts of Tax Brackets 

YouTube video available

​​*Tax laws are subject to change, consult with your accountant.

Your tax bracket is determined by your taxable income, simply put this is your Income minus your Deductions.  A Mortgage has a lot of deductions so even if it doesn't lower your actual tax bracket it will save you on your taxes.  ​

The benefits of a owning your own home are plentiful but one of the significant benefits are the numerous Tax Write'Off's that are available to you as a one time occurrence and also the numerous year after year deductions as well. These numerous deductions can potentially lower your Tax Bracket ensuring that you get to keep more of your hard earned money. 

Year after Year Deductions:

1: Mortgage Interest
The mortgage payment consists of Principal & Interest of which the majority of the payment is allocated towards interest in the beginning of the loan on a sliding scale for the life of the loan.

Example: A $400,000 loan amount @ 4% for 30 years has a total principal & interest payment of $1,909.66 of which the 12 months interest portion of $15,871.79 (if bought on January 1st) is a write off that you will get annually for the life of the loan on a sliding scale till the loan is paid off.

2: Property Taxes
These are the taxes that you pay on the home every year, you can write this off each year. 

3: Mortgage Insurance (PMI or MIP)
This write off is contingent upon your income (Single at or under $50,000 & Married at or under $100,000) 

One Time Deductions:

4: Points Paid: 
If you've decided to pay points to lower your interest rate 1 point is equal to 1% of your Loan Amount.

The IRS treats the point(s) paid as prepaid interest & for this reason it's eligible as a deduction.
If this was done for your first home you can take the deduction all at once.  If this was done on a second home or on a refinance it would be spread out upon the life of the loan.


5: Energy Efficient tax credit: If you've made efforts to make your home more energy efficient by installing equipment like energy-efficient windows, storm doors, asphalt or metal roofs, insulation, air-conditioning and heating systems, the IRS wants to give you a tax credit of up to $500. 


6: Renewable Energy tax credit: If you’ve installed equipment that uses renewable sources of energy such as the sun and wind, to help power your home,  you may be eligible for the Renewable Energy Efficiency Property Credit. This tax credit may be up to a 30% of the cost of the installation & equipment.


7: Home expenses and improvement:
You can't write off the cost of Home Improvements; Material or Labor directly.  You can however add it to the cost when you sell the property to lower your capital gains. 

8: Leverage Financial Products: 

• IRA: The IRS allows first-time home buyers to withdraw up to $10,000 from their traditional IRA penalty-free, your spouse or even a parent, child, or grandchild can kick in another $10,000 from their IRA accounts for a total of up to $20,000. 
• 401 K: You can also borrow half of your 401(k) balance up to $50,000 for the purchase of a home. 

Other Deductions: 

9: Capital Gains Exclusion (Keep more profits when you sell):
If you live in the home for more than two years then sell you can keep the profits of up to:

• $250,000 if you are single
• $500,000 if you are married

​
10: 2-4 Family Home:
If you own & live in a 2 - 4 unit home you get the above benefits and can additionally write-off:

Auto & Travel	​Insurance	Repairs
Advertising	Legal and other fees	Supplies
Cleaning and maintenance	Management fees	Utilities
Commissions	​Other interest	Depreciation or Depletion

​benefits:

Potentially Lower Tax Bracket	Higher Write-Off's
​Larger Potential Tax Refund	​Lower Taxable Income

Author: Mohamed T Gulamali

​2017 Tax Bracket: Single

​Tax bracket	​Income after deductions	Taxes Owed
10%	​$0 - $9,32	​10% net
15%	$9,326 - $37,95	$932.50 + 15% of anything over $9,325
25%	$37,951 - $91,900	$5,226.25 + 25% of anything over $37,950
28%	$91,901 - $191,650	$18,713.75 + 28% of anything over $91,900
33%	$191,651 - $416,700	$46,643.75 + 33% of anything over $191,650
35%	$416,701 - $418,400	$120,910.25 + 35% of anything over $416,700
39.60%	+ $418,401 ​	​$121,505.25 + 39.6% of anything over $418,400

2017 TAX BRACKET: Married Joint

​Tax bracket	​Income after deductions	​Taxes Owed
10%	​$0 - $18,650	10% of taxable income
15%	​$18,651 - $75,900	$1,865 + 15% of anything over $18,650
​​25%	​$75,901 - $153,100	​​$10,452.50 + 25% of anything over $75,900
28%	$153,101 - $233,350	$29,752.50 + 28% of anything over $153,100
33%	$233,351 -  $416,700	$52,222.50 + 33% of anything over $233,350
35%	​$416,701 - $470,700	$112,728 + 35% of anything over ​$416,700
​39.60%	​+$470,701	​$131,628 + 39.6% of anything over $470,700

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