REIPRIME Logo
Intermediate1 hour15 terms

Mortgage Interest Credit Terminology

This curated collection offers key terms that might be helpful when exploring the Mortgage Interest Credit (MIC) and related homebuyer tax benefits. It's designed as a quick reference for commonly encountered concepts, supporting your understanding of how these credits function and their potential impact on the housing market. Use it to clarify terminology and navigate the specifics of homeownership tax incentives.

Term Collection

1

Rental Property

A rental property is real estate purchased with the intent to generate income through tenant rent payments and potential property value appreciation.

Beginner13-14 min
2

Tax Credit

A tax credit is a direct reduction in the amount of tax owed, dollar-for-dollar, providing a significant financial benefit to real estate investors by lowering their overall tax liability.

Beginner5 min
3

Passive Activity Loss

Passive Activity Loss (PAL) rules limit the deduction of losses from passive activities, such as most rental real estate, against non-passive income like wages or portfolio earnings. These losses are typically suspended and carried forward until passive income is generated or the activity is disposed of.

Intermediate13-14 min
4

Mortgage Credit Certificate

A Mortgage Credit Certificate (MCC) is a federal tax credit that allows eligible first-time homebuyers to claim a portion of their annual mortgage interest as a direct dollar-for-dollar reduction of their federal income tax liability.

Intermediate8 min
5

Depreciation

Depreciation in real estate is an income tax deduction allowing investors to recover the cost of an income-producing property over its useful life, excluding land value, thereby reducing taxable income.

Intermediate13-14 min
6

Adjusted Gross Income

Adjusted Gross Income (AGI) is an individual's gross income minus specific deductions, often referred to as "above-the-line" deductions. It serves as a foundational figure for calculating tax liability and determining eligibility for various tax credits and deductions.

Intermediate5-6 min
7

1031 Exchange

A 1031 Exchange allows real estate investors to defer capital gains and depreciation recapture taxes when selling an investment property by reinvesting the proceeds into a new "like-kind" investment property within strict IRS timelines.

Advanced15-18 min
8

Write-off

A write-off in real estate investing is an expense that can be legally subtracted from your gross income to reduce your taxable income and lower your overall tax burden.

Beginner1-2 min
9

Real Estate Tax Planning

Real estate tax planning involves strategically managing real estate investments to minimize tax liabilities and maximize after-tax returns, utilizing various deductions, deferrals, and entity structures.

Intermediate5 min
10

First-Time Homebuyer

A first-time homebuyer is an individual who has not owned a primary residence in the last three years, making them eligible for special loan programs and financial assistance designed to facilitate homeownership.

Beginner3 min
11

Owner-Occupied Property

An owner-occupied property is real estate where the owner lives as their primary residence, often qualifying for favorable financing, lower down payments, and significant tax benefits.

Beginner14-15 min
12

Tax Liability

Tax liability refers to the total amount of tax an individual or entity owes to a taxing authority, such as the IRS, for a specific period, typically on income or capital gains from real estate investments.

Beginner2-3 min
13

Qualified Mortgage Interest

Qualified mortgage interest is the interest paid on a loan secured by your main home or a second home that may be deductible from your taxable income, subject to specific IRS limits and rules.

Intermediate5 min
14

Capital Gains Tax

Capital Gains Tax is a tax on the profit realized from the sale of a non-inventory asset, such as real estate, calculated as the difference between the selling price and the adjusted cost basis.

Intermediate13-14 min
15

Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (LIHTC) is a federal tax incentive program designed to encourage the development and rehabilitation of affordable rental housing for low-income individuals and families.

Advanced12-15 min

Common Questions