Many people dread it, but it comes like clockwork every year – TAX TIME! Tax Tips for VA Loan Borrowers can take advantage of many tax deductions that can result in paying less to the IRS, or getting a refund, when filing their taxes.
- Veterans who obtained VA purchase loans in 2012 can write off these costs:
- Mortgage Interest
- Discount Points
- Origination Fees
Tax Tips for VA Loan Borrowers
The “big 3” mortgage write-offs can put many veterans who use them well over the standard deduction on their 1040 tax returns for 2012. VA borrowers, like other homeowners, are allowed to write off ALL of the mortgage interest they pay every year. For the initial couple of years, almost all of your mortgage payments will go toward interest. Therefore, this deduction is pretty sizable for new homeowners.
Discount points and origination fees associated with your 2012 home purchase can also be deducted – even if you weren’t actually the one to fork over the dough. VA loans allow for up to all closing costs and up to 4% concessions to be seller-paid. Even if the seller or someone else pays discounts and origination for the buyer, the buyer can still itemize them on the tax return.
- Deduct Interest through a VA Cash-out Refinance
A VA Cash-out Refinance Loan can enable veterans with credit card debt to turn their high-interest debt into a low-interest mortgage payment with a tax benefit to boot. Most credit cards carry an interest rate of around 21%. The going mortgage interest rate is currently around 3.5 percent. Veterans benefit twice when using the cash-out program, because they can reduce their monthly payments on their credit card debts and take the tax deduction on the mortgage interest paid. When the VA cash-out program is used, the mortgage balance increases to reflect the cash taken from the home’s equity.
- No Capital Gains for Most Home Sellers
Married homeowners filing jointly can sell a home for up to $500,000 tax free. They must occupy the home for two years. Capital gains can be avoided even if a different home is sold every two years. Single filers are permitted to sell a home up to $250,000 with the same tax-free benefits. As long as the home is used as a primary residence, a requirement for VA borrowing anyway, many veterans avoid paying taxes after selling a home. For active duty military members frequently reassigned, this can be an especially handy tax deduction.
For more on VA loans, contact a specialized lender.
By Lynn Goya
Published in Veterans Journal
1-7-2013
One thought on “4 Top Tax Tips for VA Loan Borrowers”