topic Re: Tax deduction in Home loans

Tax deduction

Soprano1016 — Tue, 25 Aug 2020 00:00:04 GMT

My fiancé and I just bought a house and we are trying to prepare for next years taxes and benefits for home ownership. We both own the house and pay the mortgage 50/50. Do we each need to be prepared to show our payments specifically from each of our accounts to prove this or will documentation not be needed? Any help with this would be great!

Re: Tax deduction

VolvoGirl — Tue, 25 Aug 2020 00:18:18 GMT

Do you think you will have enough deductions to Itemize? Especially if you only have half. I don't know what the Standard Deduction will be for 2020 but for 2019 for Single it was 12,200.

Re: Tax deduction

Soprano1016 — Tue, 25 Aug 2020 00:22:14 GMT

I’m not sure...it depends on what we can include. We did a conventional mortgage so had 20% and closing costs plus property taxes and CDD. I just wanted to be prepared in case itemized is the way to go.

Re: Tax deduction

xmasbaby0 — Tue, 25 Aug 2020 01:14:00 GMT

HOMEOWNERSHIP DEDUCTIONS

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher. Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.

Standard Deduction
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund. The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you. Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

2019 Standard Deduction Amounts

Single $12,200 (+ $1650 65 or older)

Married Filing Separate $12,200 (+ $1300 if 65 or older)

Married Filing Jointly $24,400 (+ $1300 for each spouse 65 or older)

Head of Household $18,350 (+ $1650 for 65 or older)

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund. Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees. There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.

Homeowners Association (HOA) fees for your own home are not deductible.

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, private mortgage insurance (PMI) and loan origination fees (“points”) that you paid in 2019. You should have a 1098 from your mortgage lender that shows this information. Lenders send these in January/early February.

Re: Tax deduction

Opus 17 — Tue, 25 Aug 2020 17:27:13 GMT

@Soprano1016 wrote:

I’m not sure...it depends on what we can include. We did a conventional mortgage so had 20% and closing costs plus property taxes and CDD. I just wanted to be prepared in case itemized is the way to go.

Before you are married:

You will file separate tax returns. Single, or maybe one of you will file as head of household if you have a qualifying dependent. Each partner can only deduct taxes or interest that he or she actually paid. If audited, you would want to be able to prove that from bank records. Because the standard deduction is fairly high, it may be of benefit for one partner to pay 100% of the mortgage to be able to deduct the interest and property taxes, rather than splitting them on your tax returns. I'm sure you can figure out some way to equalize the other household expenses.

After you are married:

If you are married on 12/31 of the year, you file as married for the whole year. Usually, married filing jointly is best, even if your incomes are different, because many critical deductions and credits are reduced or disallowed when married filing separately.

If you file jointly, you deduct the entire amount one time, regardless of whose bank account it came from, even if you married at the end of the year.
If you file separately, you can divide the expense any way you like, regardless of who paid what.
However, if you file separately and live in a community property state, then the expenses from before the marriage are divided based on who paid what, and the expenses from after the marriage are divided 50/50 regardless of who paid what.