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30 September 2016 Military Pay

Since 1 October 2016 falls on a weekend, the next regular, active duty military payday is Friday, 30 September 2016.  That means that your 30...

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Tax Benefits of VA Loans Great for Veterans

Tax benefits are yet another perk for veterans buying homes with VA loans.
 
Tax benefits of VA loans mirror those of other mortgage loans, and are an additional advantage for veterans who buy homes using the government-backed military mortgage program. Here are a few reasons why:
 
1. VA Purchase Loans and Tax Write-Offs
 
Veterans with VA purchase loans can usually claim deductions for the following:
 
  • Mortgage Interest
  • Discount Points
  • Origination Fees
 
The mortgage interest “tax write-offs” alone can put veterans well over the standard deduction each year on their 1040 tax returns. Servicemembers can write off 100% of the interest paid in each tax year. Almost all of your mortgage payments for the first couple of years will probably go toward interest, which means that much of your first mortgages payments may not count toward your taxable income, decreasing how much you owe the federal government that year. 
 
Discount points and origination fees associated with your VA purchase loan, regardless of who pays them, can also be deducted. This is especially good for veterans, because VA borrowers can negotiate to have the seller pay up to all closing costs and up to 4% concessions when buying a home with a VA loan. Even if the seller pays discounts and origination for the buyer, the buyer can write them off. 
 
2. Mortgage Interest Deduction on VA Cash-out Refinance
 
The VA Cash-out Refinance program can be used to pay off credit cards and other debts. When this is done, essentially the short-term debt is eliminated and the interest rate, which can run in the high teens to 20 percent, is reduced to a competitive mortgage rate. The going mortgage interest rate is currently around 3.5 percent. In addition to a lower interest rate, under certain circumstances, paying off short-term credit card debt with cash out of a VA refinance loan can result in a mortgage interest deduction.
 
3. House SOLD Tax Free
 
Married homeowners are allowed to sell a house for up to $500,000 tax free. Just live in the home for two years. And, the homeowner can repeat the process with a successive home and avoid these capital gains even if a different home is sold every two years. Singles are allowed to sell a home up to $250,000 with the same tax break. As long as the home is used as a primary residence, a pre-requisite for VA borrowing anyway, veterans can expect not to have to pay this tax. This is an especially useful tax deduction for active duty military members who get reassigned often. 
 
If you’re interested in learning more about the tax write-offs associated with your mortgage, contact your tax specialist.  For more on VA loans, call a VA-approved lender.
 
DISCLAIMER: The information provided in this posting is for educational and informational use only. This posting is intended to highlight potential tax benefits of homeownership, and is not tax advice.

Related Topics

VA Loan Military Taxes Home Ownership Refinance
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