Deducting Points On Home RefinancesWritten by Richard A. Chapo
Any points that you pay in refinancing of your residence are tax deductible over length of loan in question. The deduction is allowable only if residence is your primary home and new mortgage replaces a previous one and/or is used to improve residence. To extent that money is taken out to pay off credit cards and non-residence costs, points may not be used as a tax deduction.Big Deductions By Refinancing Twice If you refinanced your primary residence twice during 2004, you may be in for a very nice surprise. A significant tax deduction can be created when you refinance twice in one year. If you refinance a mortgage, you accelerate deductible amount of points from first mortgage and may claim points from first mortgage all at once. As an example, assume that I refinanced my home in January 2004 and paid $3,000 in points. Interest rates continued to drop through 2004 and I then decided to refinance again in August. Because I paid off original loan with refinance, I am able to accelerate value of points of January loan.
| | IRS Reports Tax Gap of $300 BillionWritten by Richard A. Chapo
The Internal Revenue Service is reporting that difference between what U.S. taxpayers owe and actually pay on time totals more than $300 billion a year. Studying over 46,000 tax returns for individuals revealed tax gap. These results indicate a failure of 15 to 16 percent of individual tax payers to fully pay their taxes. IRS enforcement activities recovered roughly $55 billion of that total gap, leaving a net tax gap of $257 billion to $298 billion.The tax gap is comprised of three components -- underreported income, underpayment of taxes and failure to file tax returns at all. 80 percent of gap was due to individuals underreporting their income, while non-filing and underpayment accounted equally for remaining 20 percent.
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