While the days of the big tax break for buying a new home have passed, you can still get a good tax refund if you choose to refinance your home. Refinancing your home essentially means taking out a new mortgage on your home in order to get a lower interest rate on your mortgage. People refinance more often than you would think. Interest rates change quite a bit, and you can save a great deal of money just by refinancing for a lower interest rate.
However, what many people miss is that costs you pay to refinance your mortgage can actually be written off your tax statement for that year. This works on the mortgage points system. You can write off a percentage of your mortgage payment, the amount you pay in interest on your loan, known as mortgage points, just for refinancing. Be sure to talk to your accountant or a tax professional–often times, it can be difficult to calculate how much you can write off. In some cases, other expenses associated with refinancing your home loan may be deductible from your income tax as well. If you pay points to secure the loan, then you're eligible for a write-off.
And, if you refinance your home in the middle of a year, you'll be able to claim all previously undedicated points on your previous loan as well as your new one. Just because your new loan may only be instated for half of the year doesn't mean the money you paid towards your old mortgage during the first half of the year don't count, so be sure to write-off the total amount paid on either loan in points. Also, if you choose a cash-out option on your refinancing, which gets you back your equity, and then you put that money back into your home through home improvements or renovations, you're eligible for a big discount on costs there as well! Be sure to talk to your accountant about getting a tax refund on refinancing your new home to get the maximum value out of a refinance.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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