Did you know you may be able to deduct some home-related expenses on your taxes? How much you can deduct will depend on the size of your mortgage and the amount you pay in state and local taxes — and this information is included in certain mortgage-related documents.
While you should always consult a tax advisor regarding your income tax situation, here is a list of mortgage-related documents you should gather before you file your taxes:
- Mortgage or home equity line of credit interest paid. Your lender will send you IRS Form 1098, your Mortgage Interest Statement. This form tells how much interest you paid on your mortgage or home equity line of credit throughout the past year.
- Mortgage fees. You may be able to deduct the mortgage points and escrow fees (if applicable) you paid over the past year; this information is included on your Form 1098.
- Mortgage interest paid to an individual. If the previous owner of your home is financing your mortgage, the seller won’t usually send you a Form 1098. Instead, you’ll need to include the seller’s name, address, Social Security number (or Employer Identification Number), and the amount of interest you paid.
- Property taxes. You may be able to deduct your property taxes up to certain limits. If you pay these taxes through your lender, the amount should be included on your Form 1098. However, if you pay property taxes directly to your county or municipality, you’ll need a copy of your property tax bill and payment history for the past year.
- Mortgage insurance premiums. Many people pay mortgage insurance premiums to private insurance companies, the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), or the Rural Housing Service as part of their monthly mortgage payment. Your lender (or corresponding housing agency) will send you Form 1098, which shows the amount of the mortgage insurance premiums you paid, and this amount may be tax-deductible.
- Income and expenses from rental properties. If you own rental property, you’ll need to report the rent you receive as income on your taxes. On the other hand, you may be able to deduct expenses for obtaining, maintaining, insuring, and operating your rental property. It’s essential to keep accurate records of both the income and costs associated with your rental property so you can provide a documented history for tax purposes. Talk to a tax professional to learn more about what may be required and how to keep track of that information effectively.
- Mortgage credit certificate. Some homeowners qualify for a mortgage credit certificate (MCC) when they buy a home. Typically, MCCs are issued through community housing agencies and are a tax incentive to make homeownership more affordable. If you’re eligible to get an annual MCC tax credit of up to $2,000, include a copy of your printed certificate and Mortgage Interest Credit Form 8396 (which you’ll receive from your lender) with your federal tax return.
Any tax documents mentioned above should be available to you by January 31. If you don’t receive your forms by this date, contact your lender or the appropriate agency.
As a Wells Fargo customer, you can visit our tax center to learn more about the tax documents available to you and how to easily obtain them online.