How Much Can I Deduct? Mortgage Interest & Tax Deductions

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You may be just a few weeks removed from filing your 2021 income taxes, but did you understand the numbers related to your mortgage interest deductions? Like many Americans, you probably put your trust in a seasoned tax preparer and hoped for the best. Let’s clear up the mystery and confusion around mortgage interest deductions.

What is it? Mortgage interest deduction allows you to lower your taxable income by the amount of interest paid on your mortgage. This law has been in effect since the 2018 tax year. The IRS allows the deduction of interest on your mortgage loan when it is used to purchase, construct, or make substantial improvements to a primary or secondary residence.

How much is the deduction? You may deduct the interest on up to $750,000 of qualified residence loans. If you’re married and filing separately, you can deduct interest on up to $375,000 of qualified debt. Note: The amount decreased from $1 million ($500,000 for married filing separately) under the Tax Cuts and Jobs Act. If your loan was approved before Dec. 15, 2017, you can deduct the previous limit of $1 million (or half that amount if filing separately from your spouse).

Let’s see an example. In January of 2021, you were approved for a $350,000 loan to purchase a $400,000 home. You used the home as collateral to secure the loan. Later in 2021, you borrowed $150,000 for repairs on your summer residence, valued at $200,000. You used the summer home to secure that loan.

Your total in loans on both homes is now $500K, which falls below the $750,000 limit. Because you’re using the money specifically to buy and make improvements to your primary and secondary homes, you may deduct the interest you pay for these loans from your taxable income. It can be a considerable deduction.

Can I deduct from a home equity loan? Yes, but only if under the right conditions. Similar to your mortgage, a home equity loan is considered a qualified residence loan by the IRS. You’re OK to deduct if, like the example above, you’re using the money for home-related improvements. You may not deduct interest if the money is used to pay for personal debt reduction or other expenses like student loans.

What if I’m paying my son’s mortgage? You may deduct the interest, but only if you are listed as the legal owner of the home. If not, your parental generosity will not be rewarded by the IRS.

More details, please click here for Publication 936: Home Mortgage Interest Deduction.

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If you’d like to chat about mortgage options, please call me at 617-965-1236. If you’re planning to buy this year, let’s talk soon. I look forward to speaking with you.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Sauce It Up

With Memorial Day weekend signaling the unofficial start of summer, we know lots of grills and “Kiss the Cook” aprons will be brought back into action. Just one thing: you may know how to barbecue like a grill master, but how well do you know your barbecue sauces? Get to know them and you’ll have friends and neighbors in your yard all summer long.

  • St. Louis Style. This is a must for those baby-back ribs you’re defrosting. St. Louis blends many ingredients from other regions for a tangy deliciousness.
  • Memphis Style. You may think this is a trick question, because most barbecue joints in Memphis serve their meats without sauce. But that doesn’t stop our friends from Tennessee. Memphis sauce complements the dry-rubbed pork, and is often served as a side condiment.
  • Texas Style. Perhaps the most savory of the sauces, beef bouillon is the secret ingredient for peak sauciness.
  • Kansas City Style. This is probably the style you’re most familiar with, because this sauce goes with all meats. Tangy and sweet with a touch of molasses, Kansas City’s barbecue sauce is legendary.

Too much meat? Here are some recipes to grill for your vegetarian and vegan friends and family.

Home Improver: Stop Ants with Home Remedies

If you’re like a growing segment of America, you’re noticing you’ve got too many toxic sprays in your home. But how else do you get rid of ants without a toxic spray?

Try a home remedy: DIY ant repellent. There are several natural ingredients to keep the little food-seeking armies away from your home.

  1. Vinegar. Fill a spray bottle with a 50-50 mix of vinegar and water. Spay directly on ants. Wipe them up and dispose of the dead insects.
  2. Mint. We may find it a refreshing scent, but ants can’t stand mint. Wipe down ant entryways with a few drops of peppermint essential oil and ants will head to the neighbor’s house instead.
  3. Cayenne or Black Pepper. If you spot an ant entryway (typically cracks or openings in windows, doors and floors), create a little wall of pepper to keep ants out. Use the 50-50 water/cayenne method (see “vinegar” above) to chase ants away. If you feel bad for the little critters and just want to stun them so they run away, this method should get the job done.

3 Downpayment Myths Debunked

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When it comes to mortgage downpayments, there seems to be some confusion about how much you really need to put down on a new property. Let’s take a look at three common misconceptions.

1. The 20% Rule. If you were to ask the average person on the street about downpayments, the majority of them would say 20% is required. While 20% is a common guideline, it’s not necessarily the reality. In fact, there are a number of low downpayment programs available.

2. It Has to be ONLY my money. Gift funds are a great option. A gift may be provided by a spouse, child, or anyone related to the borrower. It must specify the dollar amount and an official gift letter is required stating that the funds were a gift and no repayment is expected.

3. First-time Homebuyers Only. While the industry has always encouraged first-time homebuyers, it’s a myth to think current and previous homeowners will be forced to submit 20% and not a penny less. I have worked with numerous clients over the years who have preferred a smaller downpayment so they can keep some money for repairs and additions to their new home.

Don’t be fooled by these misconceptions that have seeped into the general consciousness. There are more options for low downpayments than you may have imagined. If you or someone you know would like to explore the possibility of a low downpayment option, I can help. Call me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Appraisal vs Assessment: What’s the Difference?

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The difference between an assessment and an appraisal is significant. The two words are not interchangeable, contrary to popular thought. A look at each of these terms will show two very different looks at your home’s value.

An appraisal determines the market value of a specific home at a specific time. The appraiser determines this value based on recently sold homes within the past 90 days. They are of equal (or similar) comparison and are located within approximately one mile from your home. Adjustments are made for differences that might include location and square footage as well as the number of bathrooms.

An assessment, on the other hand is notably different. It is determined by the town or municipality to set property taxes. The amount of taxes you’ll pay is based on the assessment. But here’s the thing: the number is based on stats from previous fiscal years.

For example, a home sold in 2016 has a tax assessment based on sales from 2013 or 2014.

In a nutshell, an appraisal is based on very recent sale prices and are used to determine value. Assessments are based on the past and are specifically used for taxes.

I hope this helps clear up any confusion. If you need further clarification, please contact me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Tax Advantages of Your Mortgage

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It’s tax time already. Although we get a few extra days with this year’s tax deadline falling on April 18th, we’re only a month away. Today we’re discussing the tax advantages and incentives that come with owning a mortgaged home.
If you have recently purchased or are planing to buy a new home, you may not be aware of the significant tax breaks that come from your mortgage and your home itself.
One of the largest tax breaks for homeowners is the
deduction of interest paid for the year. By now, you should have received documentation from your lender indicating the total interest you’ve paid.
Have you recently refinanced? There is a tax benefit. Because you pay more interest than principal in your first few years of a new mortgage, your deductions are higher.
Your property taxes are also a major deduction, especially if you are in a highly taxed city or town. This also applies to homeowners without a mortgage to pay.
Home improvement costs may lead to additional tax breaks. Look for the Energy Star logo on new appliances in your home. Energy-saving water heaters, windows, doors and more may give you a bigger tax break than you had imagined. Check out the Energy Star website to see which changes to your home are tax deductible.
I strongly recommend you meet with a tax professional to understand the opportunities for tax deductions and learn of other breaks you may qualify for as a homeowner. Need a recommendation? I have someone I trust who can help. Call me at 617-965-1236 for the referral or to answer any mortgage-related questions.
Ready to purchase a new home or refinance the one you own? Please get in touch and I’ll be happy to help guide you through the process. I look forward to speaking with you.

March’s Home Improver
When Should I Seed My Lawn?
A beautiful, green, well-kept lawn makes your home more attractive to potential buyers while becoming the envy of your neighbors who struggle with patchy grass that just can’t compete.
Here are some grass-growing secrets that can help you upgrade your home’s curb appeal.
1. When is the best time to seed my lawn? You would think it would be right now, with the first day of spring just a few days away. Typically, the best time to seed a lawn is in the fall. This is due to cooling temperatures and soil that isn’t too moist from melting snow and seasonal rains.
2. What problems may I run into by seeding now? Cool soil temperatures can slow or prevent seed germination. Springtime weeds can sometimes be a cause for concern.
3. Can I use a weed killer? Bad idea. Liquid and granular weed preventers can prevent germination and kill immature seedlings. In effect, you’re killing weeds and your grass at the same time. The rule of thumb is to work on weeds only after your young grass has been mowed at least four times.
4. What are my options for spring seeding? First, test your soil. Most turf grasses work best with neutral soil. Ask your landscaper to test it before planting. If it’s a DIY project, you can buy a soil test kitfor under $25. Also, be sure to choose a grass that works best for New England climate and sun exposure.
5. How do I improve my lawn quickly before putting it on the market? Calling a professional is always recommended. An experienced landscaper has the knowledge to get the seeding job done with a better chance of success than a homeowner who is not working in lawn care on a daily basis. It may be well worth the investment if your current lawn is an eyesore and you’re getting ready to list your home.
6. What about sod? If you need a lawn in a hurry, sod is the way to go. Although the initial cost is higher and lots of watering is critical, your instant lawn is installed free of weeds and can be walked on very soon after it’s planted.