Why Would You Not Itemize Mortgage Interest?
The interest you pay on your home adds to the itemized deductions you subtract from adjusted gross income, line 37 on your income tax return from the Internal Revenue Service. You use schedule A to calculate all the itemized deductions and put the total on line 40.
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Significance
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If you have considerable interest on your home and other deductions, it pays to itemize. However, you have a standard deduction available that might be bigger.
Size
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The standard deduction for married and filing jointly is $11,400. It's $5,700 for single filers and married filing separately and $8,350 for taxpayers whose filing status is household as of 2009. The amount increases to $8,400 for 2010. Qualifying widows receive a standard deduction of $11,400.
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Considerations
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See if you're eligible for other deductions on schedule A. These include charitable contributions, property taxes, state and local income taxes, medical expense more than 7.5 percent of your gross income and miscellaneous expenses exceeding 2 percent of your income. The miscellaneous expenses include certain legal fees, tax preparation, job-related expenses such as tools, union dues and continuing education credit, among others.
Effects
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If your total on schedule A does not exceed your standard deduction, it doesn't pay to itemize your mortgage expense.
Expert Insight
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If your itemized deductions exceed your standard deduction only by very little and you included state and local income tax, reconsider your decision to standardize if you expect to receive a large state tax refund that is more than the additional deduction. You have to include the refund in your taxable income for the next year if you itemize, even if you applied it to your next year's taxes. You don't if you take a standard deduction.
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References
- Photo Credit tax form image by Kirill Zdorov from Fotolia.com
