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. Th e 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. Th e interest rate on your mortgage typically lowers by 0.25% with each point you buy. Mortgage Credit Cert ifi cation (MCC). Th is IRS-based program is aimed at helping lower-income individuals, couples, and families a ff ord their fir st home by essentially subsidizing the loan. Th e MCC program is designed to help fir st-time home buyers o ff set a portion of their mortgage interest on a new mortgage to help them qualify for a loan. Th e 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 o ffi cer may or may not know how to do. Home improvements. Th ere are many reasons to consider home improvements, but earning you tax deductions is de fin itely one of them. For example, you can use a home improvement loan to fin ance the cost of improvements on your home, which will then likely qualify you for mortgage interest deductions. Th e 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 taxable income. Add the improvement cost to the value of your property to reduce the amount of this taxable income, which can save you money in taxes a ft er the sale. Home o ffi ce deduction. If you are self-employed and work from home, the amount of space in your home that’s dedicated toward business activities is tax deductible. Th is deduction will include 156
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