VA Loans and Tax Deductions
It’s tax time and even though it’s not everyone’s favorite time of the year it’s the season where citizens of the U.S. pay their taxes to help finance the country’s operations. There are those who do their own taxes and those that have a professional tax preparer do it for them. We all want to pay our fair share of taxes but we certainly don’t want to pay more than we have to, right? That means it’s time to consider all possible deductions that can reduce our annual tax bite. For all income tax questions, you should refer them to a tax professional but here are some general income tax issues as they apply to VA mortgages.
Owning your own home and financing it means you may deduct the interest paid on your mortgage from your taxable income. That’s probably the single largest deduction someone with a VA loan will have and a strong rent vs. buy consideration. You have to pay property taxes on your real estate and depending upon where you live, you’ll have a higher or lower property tax bill each year. The IRS makes the property tax bite less painful by allowing you to deduct those property taxes from your taxable income.
Did you pay a discount point last year to lower your interest rate? For a purchase loan, the point is tax deductible in the year paid. If you refinanced and paid a point, the point is deductible over the life of the loan. That means if you paid $3,000 for a point and you got a 30 year loan, each year you may deduct $30 from your gross taxable income.
Do you own your own business? Then you’re able to deduct allowable business expenses from your business income. Be careful here though, too many expenses may mean your business income is depleted so much so that the qualifying income isn’t there should you apply for a VA loan in the future.
