Tax FAQs

Question: Can I deduct my mortgage insurance?

Answer: Yes! Qualified mortgage insurance (sometimes called PMI) is tax-deductible as part of the mortgage interest deduction, and it goes on Line 13 of Schedule A.

A few rules: You only get this deduction if you itemize. The mortgage has to be for a first or second home that you live in. The loan must have been taken out after 2006. And the deduction starts to phase out when your adjusted gross income (AGI) hits $100,000. Find more info here in IRS Publication 936.

Question: Can I deduct the points from refinancing my mortgage?

Answer: Yes…but not all at once. The points have to be deducted over the life of the loan. So if you paid $3,000 in points for a 30-year refinance, you can deduct $100 a year until your loan is paid off.

Question: Can I have a 401(k) AND a Roth IRA?

Answer: Yes! As long as your income falls in the IRS limits for Roth IRAs, you can absolutely have both. Here’s a quick link to the income limits.

Question: What’s the difference between a tax deduction and a tax credit?

Answer: A tax deduction reduces the amount of income you have to pay tax on. So if your income is $50,000 and you have a $500 deduction, your taxable income would be $45,500.

A tax credit directly reduces the amount of tax you have to pay, dollar for dollar. So if you owed $800 in taxes and had a $500 tax credit, you’d only have to pay $300.

Bottom line: Credits are better. Find and take as many as you can.