Mortgage Dictionary
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Tax Deductions for Real Estate
When you buy a principle residence (or second home), you may be able
to take two types of tax deductions.
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Mortgage interest. The amount of
mortgage interest that you pay is deductible in the year that
you pay the interest.
-
Points. You can also deduct the
points paid to buy your home, even if those points were paid
by the seller. Normally, the deduction for points occurs in
the first year of the mortgage. However, deductions for points
on a refinanced mortgage are spread over the life of the mortgage.
Your ability to take these deductions depends on many factors, such as
whether you itemize. Check with an accountant to be sure.
To assess the impact of tax deductions on your total mortgage cost,
simply check the "Include tax deductions" checkbox, which appears
at the top of this site's
mortgage calculator
when the main goal is "Find total mortgage cost". When you click the
"Find total mortgage cost" checkbox, the calculator assumes that you
are fully entitled to all deductions.