Are VA Loan Fees Tax Deductible?
One of the biggest perks of buying a house is being able to deduct certain expenses from your annual taxes. When you buy a home with a VA mortgage in Colorado Springs, you’re entitled to an additional tax benefit that other homebuyers aren’t: deducting your VA loan fees. The process isn’t as simple as you might think, but as long as you understand the nuances, you’ll be ready come tax season. This is what you need to know.
The Amount You Can Deduct Depends on What You Pay
Every veteran has to pay a VA loan funding fee when they apply for and accept a VA mortgage. This money is used by the VA to guarantee future loans and ensure that the benefit continues for decades to come. However, that amount isn’t always the same for every veteran.
If you served in the military, you’ll end up paying 2.15 percent of the loan’s principal if you don’t have a down payment and between 1.25 and 1.5 percent if you put a down payment on the property. If you served in the Reserve or National Guard, you’ll pay 2.4 percent without a down payment and between 1.5 and 1.7 percent with a down payment.
The Way You Pay Your Fee Matters
When you take out a VA mortgage in Colorado Springs, you’re given two choices to help you handle the funding fee: pay it upfront or roll it into your loan. There is no right or wrong answer, but it will impact the amount you can deduct from your taxes.
If you pay the fee in cash upfront, you’re entitled to deduct the full amount of the fee from your taxes for that year. However, if you roll it into your VA mortgage loan, you’ll end up only being able to claim a small portion of the fee. If you’re looking for a way to get the biggest tax break, pay the fee at the time you receive your mortgage loan. If you’re worried about finances and don’t have the money saved up, don’t sweat it. Just roll it into your mortgage and look for other ways to save on your taxes.
Apply for a VA Mortgage in Colorado Springs Now
If you’re ready to start looking for homes so you can start building equity and saving on your taxes, don’t wait. Apply online for a VA mortgage in Colorado Springs and get prequalified quickly.
