Mortgage Tax Deductions for Homeowners
Tax deductions can help by lowering the amount of taxable income you have to pay on. If you’re a homeowner with a mortgage, a mortgage interest deduction could similarly benefit you. Here are some ways to navigate mortgage tax deductions when filing your tax return. The information contained below should not be construed as tax advice. It is general guidance only and should always be confirmed with your tax professional.
What Is a Mortgage Interest Deduction?
A mortgage interest deduction is an itemized tax incentive to help homeowners reduce their tax burden or increase their refund. This deducts interest paid on any loan used to build, purchase, or improve your home from income taxes. You can also sometimes claim this deduction on mortgages for second homes or vacation homes, as long as it’s within limits. This amount is reported each year by your mortgage company on the Form 1098.
How Do Mortgage Interest Deductions Work?
Mortgage interest deductions depend on when the mortgage began, how much it is, and how the mortgage is used. The deduction can only be taken if it’s a secured debt, meaning you’ve pledged your home as collateral.
Once you’ve met qualifications, you’ll know how much mortgage interest is paid by reviewing Form 1098 and reporting it on line eight of the Schedule A form, which is a list of various deductions, including medical bills, taxes, and charitable donations. If you have a rental property, you can deduct that interest as well by reporting it on the Schedule E with supplemental income. Usually, homeowners can deduct the entire mortgage interest paid amount.
What’s Included in a Mortgage Tax Deduction?
Mortgage tax deductions can cover a variety of mortgages. All of the following qualify as a mortgage tax deduction:
? Interest on primary or secondary mortgages
? Mortgages on home equity loans
? Mortgage insurance premiums
? Prepaid or discount points
What’s Not Included in a Mortgage Tax Deduction?
While mortgage income taxes are a deductible expense, there are several aspects of home ownership that are not. Here is what you can’t include as a mortgage tax deduction.
? Homeowners insurance and premiums
? Principal payments
? Deposits or down payments
? Utilities and domestic services
? Title insurance
Your Central Florida Mortgage Experts
If you’re looking into buying a Central Florida home, consider financing through Butler Mortgage. We’ve worked with both first-time and seasoned buyers for more than 25 years to help them own their dream property. To find the right loan solution for you, call us at 407-931-3800 or fill out our free consultation form online.