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May 24, 2022

Greetings Thrifty Friends,

Spring is here and that means the start of the home-buying season. Buying a house (or a condo or a town home) is a huge decision that requires a lot of planning, a lot of budgeting and a lot of cash going in, so if you are hoping to buy a home this year you have probably been planning and saving for it for a while.

But with interest rates going up the question becomes; do you still want to buy this year?

Mortgage interest rates are only one component in a home-buying decision. And you can always refinance once you have put a couple years worth of equity into the property. Homeownership also has certain tax advantages.

Remember, if you rent all of your money goes to the landlord. If you own, a lot of that money comes back to you in the form of...

Keep pinchin' those pennies,

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Types of Deductions

You can probably deduct all of your home mortgage interest. In January, after the end of the tax year, your lender will send you IRS Form 1098 detailing the amount of interest you paid in the previous year.

The money you pay in property taxes is deductible too. If you pay for your taxes through a lender escrow account, you will find the amount on your 1098 form. If you pay directly to your municipality, you have personal records in the form of a check or automatic transfer.

As part of a new loan or refinance, you may have paid points to the lender. Points are normally priced as a percentage of the total loan. If you paid $275,000 for your home, each point costs you 1 percent of your home, or $2,750. As long as you actually gave the lender money for these points, you get a deduction.

If you took out a loan in 2007 or later, you might be able to deduct your private mortgage insurance payments. Lenders charge PMI to borrowers who put down less than 20 percent. If you're single and your adjusted gross income is less than $50,000, you're eligible for the deduction. Above $50,000, the deduction phases out. If you're married, the threshold is $100,000.