Save on Taxes
Mortgage Interest Tax Deduction
Whenever conferring with a 1st time home buyer, I always discuss the significant advantages of home ownership over renting. Not only is there the significant pride and value of home ownership itself, there is all the financial benefits that arise from improved credit worthiness, opportunity for increasing equity and ability to tactfully upgrade/enhance the property to increase the home's value.
Yet, the greatest benefit may be the Mortgage Interest tax deduction. Itemize your taxes and suddenly you can deduct all the interest paid on your mortgage. As a result, you get a significant reduction of taxes owed just for the fact you own a home. Try to get the landlord to give you a fat rebate for living in a rental for a year!
Read below as Al Clark spells out the details! No use restating!!
Be sure to read and use the information! If still a tenant, read and then call me and we will ensure you can deduct in 2015!
Homeowner Tax Tips For Your Best Return: Deducting Mortgage Interest
The mortgage interest deduction is one of the largest tax benefits homeowners get. Here’s what you need to know to take advantage of it:
If you itemize your deductions on Schedule A of Form 1040, you can include the interest you paid on your home mortgage of up to $1 million ($500,000 for married, filing single) as long as you used the loan to buy, build or improve your home.
You can generally deduct the interest on a home equity loan of up to $100,000 ($50,000 for married filing single) used for any purpose, as long as the home equity debt plus your first mortgage don't add up to more than the value of your home.
Get more details about the Mortgage Interest Deduction in Internal Revenue Service Publication 936.
Here are 10 more things you need to know to claim your mortgage interest deduction:
- In general, you have to be legally obligated to pay the mortgage. In other words, you can’t deduct mortgage interest paid, for example, on your parents' home unless you have a legal duty to pay their mortgage.
- If you have a high income, the Alternative Minimum Tax can affect your ability to deduct mortgage interest.
- Your mortgage must be a secured debt, meaning your lender can foreclose on your home if you don’t pay your mortgage.
- Your home can be a boat, mobile home, house trailer, condominium, cooperative or similar property, which has cooking, sleeping and toilet facilities.
- You can deduct late payment charges as though they were interest as long as your lender didn't perform a specific service in exchange for the fee.
- If you pay off your home mortgage early and you have to pay a prepayment penalty, that amount also counts as interest, as long as your lender doesn't charge the fee in exchange for a specific service performed or to cover the cost of something connected to your mortgage (like giving you a payoff statement).
- If you make annual, or periodic, rental payments on a redeemable ground rent, you can generally deduct them as mortgage interest. Payments made to end the ground lease, and payments for nonredeemable ground rent, aren't deductible as mortgage interest.
- Reverse mortgage interest generally isn't deductible until it’s paid – and you don’t usually pay interest on a reverse mortgage until you (or your heirs) sell your home and pay off the reverse loan.
- If you own a cooperative apartment, you’ll get a Form 1098 from the co-op telling you how much interest you paid on any building-wide mortgages. You can deduct that amount along with the interest you paid on your individual unit loan (if you got a mortgage to buy your shares in the co-op).
- The rules change if you got your mortgage on or before Oct. 13, 1987.
Getting a headache from thinking about all the different rules? You can use tax software or an online tax service to prepare your return. PC Magazine says the TaxACT Ultimate Bundle was the best online tax program last year. Consumer Reports Magazine has good advice about selecting online tax preparation help.