First time filing taxes with mortgage - help me understand

[FerrumB5]

Hi All,

this is the first time I will be filing taxes as a homeowner. Please help me understand which numbers are relevant and if they are going to affect my taxes for 2015. The 1098 form from loaner has only interest but no escrow. Here's what I paid in 2015:

Principal: $1501
Interest: $1357
Escrow: $3920

Is escrow deductible?
My other expenses were not high (Medical etc), so adding even both interest and escrow will be less than standard deduction of $12000

Thanks in advance!

[NotJen]

Escrow itself isn't deductible, but any property taxes you paid in 2015 are.

[HPstache]

Escrow is often made up of property tax and home insurance, the property tax portion is deductible on your Schedule A if you are itemizing your deductions.  The Interest you paid on your loan ($1,357) is also deductible on the same form and if you pay Private Mortgage Insurance "PMI" that is also deductible.

If you bought the home in 2015 you can also deduct some of the cost associated with the closing.

[FerrumB5]

So, if I itemize for 2015, the amount of escrow (it is only property tax, no insurance) shown in original post is deductible.
How does IRS know that amount if it's not shown on my 1098?

[NotJen]

So, if I itemize for 2015, the amount of escrow (it is only property tax, no insurance) shown in original post is deductible.
How does IRS know that amount if it's not shown on my 1098?

It's only deductible if it was actually used to pay property taxes in 2015.  If it's sitting in escrow, waiting for your next property tax bill, it isn't deductible.

[FerrumB5]

Escrow is often made up of property tax and home insurance, the property tax portion is deductible on your Schedule A if you are itemizing your deductions.  The Interest you paid on your loan ($1,357) is also deductible on the same form and if you pay Private Mortgage Insurance "PMI" that is also deductible.

If you bought the home in 2015 you can also deduct some of the cost associated with the closing.

Do you have a list of closing associated costs that are deductible, or is it just a % of the closing cost? (I assume TaxAct etc will ask me questions, but real people's advice is valuable). No PMI, paid 40% down to get good rate

[NathanP]

As has been mentioned, the amount of escrow doesn't matter.

The tax forms/software that you use will ask for the amount that you paid in property taxes, mortgage interest and PMI during 2015. If these amounts are relatively low, then they may not exceed the standard deduction and therefore will not be used.

The IRS COULD query this information from your mortgage provider and state tax authority. If you are dishonest you may be audited.

[HPstache]

So, if I itemize for 2015, the amount of escrow (it is only property tax, no insurance) shown in original post is deductible.
How does IRS know that amount if it's not shown on my 1098?

It sounds like you will be better off taking the standard deduction this year, but I'll let another member like MDM chime in who knows this really well.  Other common things that add to your Itemized deductions are State Income Taxes OR General Sales Tax deduction and gifts to charity.  So if you've got a decent sized state tax bill and give to charity, you might start getting close to that standard deduction where it might be worth it to itemize.  If you're using TurboTax or another popular tax software it will make that decision for you when you input all your info.

I think points paid are the only closing cost related item that is deductible.  There might be a few more oddballs that may apply for you.

Your 2016 will probaly have a lot more Interest paid, I am guessing you bought your house later in the year?

[NotJen]

Escrow is often made up of property tax and home insurance, the property tax portion is deductible on your Schedule A if you are itemizing your deductions.  The Interest you paid on your loan ($1,357) is also deductible on the same form and if you pay Private Mortgage Insurance "PMI" that is also deductible.

If you bought the home in 2015 you can also deduct some of the cost associated with the closing.

Do you have a list of closing associated costs that are deductible, or is it just a % of the closing cost? (I assume TaxAct etc will ask me questions, but real people's advice is valuable). No PMI, paid 40% down to get good rate

The only deductible closing costs will be any mortgage interest or real estate taxes paid at closing.  Interest will all be noted on your 1098 (interest + any points paid).  Real estate taxes paid should be part of your closing documents.

See this publication for more details: https://www.irs.gov/publications/p530/ar02.html

[FerrumB5]

Closing was September 10, so I paid towards escrow but lender didn't apply this money to real estate taxes yet (I think it's in spring and august)

[MDM]

Closing was September 10, so I paid towards escrow but lender didn't apply this money to real estate taxes yet (I think it's in spring and august)

In that case the escrow amount is merely an interest-free (or whatever likely low interest the lender pays you on the escrow balance) loan you have given the lender.

[Drifterrider]

Closing was September 10, so I paid towards escrow but lender didn't apply this money to real estate taxes yet (I think it's in spring and august)

Look on your HUD-1.  You probably DID pay some of the real estate taxes included in closing cost.  If you are not sure, get your realtor to go over it with you. 

[FerrumB5]

TaxAct says: "First-time homebuyers are often amazed at how many additional charges show up on their closing statement. It would offset some of the pain if some of these costs were deductible. Unfortunately, they are not deductible in the year you buy your home"

?