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Home Refinancing & Your Taxes
We’re often asked about the affect Refinancing can have on Property Taxes and Income Taxes....
While refinancing often dictates the need for an appraisal on the home, the appraisal has no effect on Property Tax rates. The county does not reassess property taxes based on the results of a refinance appraisal.
Refinancing can have multiple implications on income taxes.
Any “points” (essentially pre-paid interest) paid to obtain a home loan are deductible as an itemized deduction. Refinance points are deductible over the life of the loan, not necessarily all at the time of refinancing. However, if you incurred fees for points on the loan being paid off, the remaining unused points’ deduction on that loan all become deductible at once in the year your refinance closes.
Also, it’s important to note that a reduction in rate will often result in less annual mortgage interest, which can reduce itemized deductions.
Lastly, always be sure to give the final closing/settlement statement to your tax preparer from your refinance, especially if you have an impound account for property taxes. This form may show that property taxes were paid through the loan; an expense you may not have otherwise thought to give your tax preparer. This form also shows the above-referenced points paid, as well as interim interest that may not reflect on your mortgage company’s 1098 tax form.
Feel free to contact us with any questions about refinancing, and the resulting tax impact...we’re here to help!
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