The significant investment of buying a home also comes with significant tax deductions. Most of the deductions are itemized deductions, meaning you can only take them if you do not take the standardized deduction. Above-the-line deductions can be taken regardless of whether or not you take the standard deduction.
Origination Points
- Origination points are fees related to the bank’s cost of closing the loan. As long as they do not include costs that would usually be itemized, such as notary fees, these points are deductible.
Discount Points
- Discount points are paid by the borrower to reduce the rate of interest paid. These points are always deductible. Mortgage Interest
- Mortgage interest is deductible as an itemized deduction on the first $500,000 for mortgages issued after October 13, 1987. If your mortgage was issued before that date, all interest is tax deductible.
Private Mortgage Insurance
- Private mortgage insurance is an extra fee tacked on to the monthly mortgage payment if your down payment was less than 20 percent of the cost. For mortgages issued after 2006, this is deductible as an itemized deduction.
Property Taxes
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The real estate taxes that you pay on your home are tax deductible. You can claim up to $1,000 as an above-the-line deduction.