Originally Posted by Bilzplace
#1; My wife and I purchased a home late in the year (August) and I find the points paid and mortgage interest for 2013 totals about $6000. We don't have enough itemized deductions to equal more than the $12,200 standard deduction so I am planning on going with the standard deduction. I hate to lose the credit for the points and mort interest paid in 2013. Is there any way I can apply this next year if I itemize in 2015 for tax year 2014? If no,
#2;any other suggestions on how I might utilize these deductions?
#1;as you said, no. Most homeowners deduct mortgage interest on Sch A of 1040 in the year that they pay it. If your itemized deductions such as mortgage interest add up to more than your std deduction, you don't get to carry excess deductions forward to next year's taxes. There are exceptions, however, in which case this year's unused mortgage interest becomes next year's write-off. If you prepay interest on the mortgage when you close, you can deduct those "points" over the life of the loan. For example, if you prepay $5K on a 20-year mortgage, you can write off $250 a year $5K/20. You may have the option to deduct all the points the year you close. This requires you meet certain conditions, including that the house is your primary home and your prepaid interest isn't higher than the normal points charged in your area. Mortgage credit certificates, provided by the CA Housing Finance Agency, help first-time home buyers write off up to 20 percent of their mortgage interest as a federal tax credit. That translates into much bigger tax savings than the itemized deduction. To qualify for the credit, you have to meet certain income requirements and apply to CalHFA for a certificate. If the credit gives you more of a write-off than you have income to deduct it from, you can carry it forward three years before it expires.
#2; If you use part of your house as a home office or to store business supplies, you can deduct some of your mortgage interest even if you don't itemize. For example, if your interest for the year is $4.5K and you use 10 percent of your home exclusively for business, you can write off $450 as a business expense on Sch C of 1040, NOT on Sch A of 1040. If your home-use expenses put you in the red, you cannot write them off against non-business income. Instead, carry them forward to next year, including the mortgage-interest deduction.