GETTING STARTED How to Adjust Your Withholding Track Down Your Tax Records Your Tax Form Checklist MORE... TAX TOOLS   From TaxCut by H&R Block Will you have to pay the alternative minimum tax in 2004?   Kiplinger Tools How much should I put in my flexible spending account? 2004 survey of state tax burdens Sponsored By: Recent Columns Fear of the AMT - Feb. 7, 2005 Track Your Basis - Feb. 4, 2005 Calculating Capital Gains Tax - Feb. 3, 2005 Capitalize on Property Settlement Costs - Feb. 2, 2005 Deducting Mortgage Interest - Feb. 1, 2005 Time for an IRA Distribution? - Dec. 15, 2004 MORE ... TAX TIPS E-MAIL   Sign Up   Don't miss a single money saving Tax Tip. Now you can have Kevin McCormally's Tax Tips delivered to your inbox every day. Sign up now.

TAX TIPS
Tax Breaks for Home Buyers
by Kevin McCormally

Did you buy a home in 2003? Congratulations on your new digs and on locking in what I'm sure is a terrific mortgage rate. Now, make sure you get all the tax breaks you have coming.

Sure, you can deduct the interest you paid on your mortgage, plus the property taxes on your new place. But did you know you can also deduct any property taxes the previous owner paid in advance for part of the year you actually owned the house? You get that write-off even if you didn't reimburse the seller. Check your settlement sheet.

You also get to deduct any points you paid to get your mortgage. Two points on a $200,000 loan translates to a $4,000 deduction, and saves you nearly $1,000 in the 25% bracket. Oh, you say you're great negotiating skills persuaded the seller to pay the points for you? Believe it or not, you still get to deduct the fee on your tax return.

What about other costs associated with buying, like the title insurance premium or the appraisal fee, a recordation charge or the lawyer's' bill? Sorry, but none of them is deductible.