BIRLAD Realty

TAX BENEFITS

Every year you can deduct the mortgage interest paid on a home loan up to $1 million for a primary residence or second home, the local property tax and other mortgage costs.

UP-FRONT FEES AND CLOSING COSTS

The points paid to purchase your home loan are deductible for that year. Points paid for refinancing an existing mortgage have to be deducted over the life of the new loan. Other expenses, like the loan application, appraisal, document preparation, recording fees and significant home improvements can be added to the adjusted cost basis for determining a gain or a loss when selling the home.

FIRST-TIME HOMEBUYERS

Mortgage Credit Certificate (MCC) programs are offered by some city and county governments, allowing first-time homebuyers to take advantage of a special federal income tax write-off. The MCC makes it easier for eligible buyers to qualify for a mortgage loan and reduces the amount of federal taxes paid by the first-time home buyer every year, when he lives in the same house and keeps the same loan.

5 PROPERTY TAX QUESTIONS YOU NEED TO ASK

1. What is the assessed value of the property? Ask to see a recent copy of the seller’s tax bill to help you determine this information.
2. How often are properties reassessed? When was the last reassessment done? Usually taxes increase when a property is reassessed.
3. Will the sale of the property trigger a tax increase? Sometimes the assessed value of the property may increase based on the amount you pay for the property.
4. Is the amount of taxes paid comparable to other properties in the area? It is possible to appeal the tax assessment and lower the rate?
5. Does the current tax bill reflect any special exemptions that you might not qualify for? For example, many tax districts offer reductions to those 65 or over.

PROPERTY TAXES are assessed by city and county governments to generate the bulk of their operating revenues. The taxes help pay for such public services as schools, libraries, roads, and police protection. Re-valuations of the tax are done periodically, but the time interval varies from state to state.

THE REAL PROPERTY TAX is a tax based on the value of property, calculated using a variety of formulas and is based on a property's assessed value and the tax rate of the taxing jurisdiction, minus any property tax exemptions, such as those offered for the elderly or veterans.

AN ESCROW ACCOUNT is a special bank account held by the lender to collect monthly payments from the borrower to pay property taxes, mortgage insurance, and hazard insurance. They are set up by the lenders to ensure the property taxes and insurance will be paid on time. Property taxes are deductible from your income. They may be deducted every year on your primary residence, second home and other investment properties. The escrow money held for property taxes cannot be deducted until the money is actually used to pay the property taxes.