beneficial tax breaks that home buyers can take advantage of, both first-time and repeat buyers. Basically, the IRS allows you to deduct from your taxable income the interest you pay your lender. Home mortgage interest is one of the largest deductions for those who itemize their tax returns. Lenders will report your mortgage interest on a 1098 form sent out annually. MORTGAGE POINTS . Discount points, or mortgage points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. The cost of discount points is equivalent to 1% of your mortgage (e.g., $1,000 for every $100,000). Discount points involve prepaid interest and can reduce your total mortgage payment. The interest rate on your mortgage typically lowers by 0.25% with each point you buy. MORTGAGE CREDIT CERTIFICATION (MCC). This IRS-based program is aimed at helping lower-income individuals, couples, and families afford their first home by essentially subsidizing the loan. The MCC program is designed to help first-time home buyers offset a portion of their mortgage interest on a new mortgage to help them qualify for a loan. The program is administered by local authorities and can vary according to the state in which you live. To qualify for this tax credit, you’ll need an MCC issued by the local government, which your loan officer may or may not know how to do. HOME IMPROVEMENTS. There are many reasons to consider home improvements, but earning you tax deductions is definitely one of them. For example, you can use a home improvement loan to finance the cost of improvements on your home, which will then likely qualify you for mortgage interest deductions. The interest on a home improvement loan is deductible in full. Keep track of home improvement costs. When you sell the property, if the selling price is more than you spent to procure it, the extra amount will be considered
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