Write−offs are the government’s way of rewarding taxpayers when they’ve done something the government likes. And to judge by the write−offs, the government likes it when people borrow money to buy a house. There are write−offs aplenty, many of which people often forget.
Here are a few:
Points:
According to the IRS, origination fees charged as points must be paid for the use of money, (for example, to obtain a lower interest rate) in order to be tax deductible. Origination fees that constitute a “service fee” are not tax deductible. The question must be asked, “Does the fee apply to the use of money, or is it a service charge?” Discount points are paid to secure a lower interest rate. IRS Publication 936 lists a general rule that states, “You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally must deduct them over the life (term) of the mortgage.” However, there are conditions which, if met, make discount points tax
http://www.irs.gov/publications/p936/ar02.html#d0e942
Pre−payment penalties:
Unforeseen circumstances often cause borrowers to pull out of their mortgages sooner than expected. Fortunately,
pre−payment penalties are tax deductible, which helps ease the pain.
Pro−rated real estate taxes:
Even if the seller sent the tax collector the check, chances are the buyer paid a pro−rated portion of the taxes for the year
at closing. Be sure they know to deduct their fair share.
Pro−rated mortgage interest:
Depending on when in the month the home sale closes, buyers pay either a hefty or a tiny amount of pro−rated mortgage
interest for that month. Big or small, they can write that off. The Final Closing/Settlement Statement will show just how
much they’re due.
