How to Deduct Mortgage Interest

Save

When tax time comes around, you need to make sure you are deducting everything you possibly can to reduce your tax obligation. The IRS allows you to deduct the mortgage interest you paid over the course of the previous year to your mortgage company. Being that some people spend thousands of dollars on mortgage interest every year it is a great tax benefit; that is why many people say it is more beneficial to own a home as opposed to renting.

Things You'll Need

  • Form 1040 Schedule A
  • 1098s from your mortgage company

Wait to receive your 1098 form from your mortgage company. The mortgage company is required to send you this information in a timely fashion after the tax year is completed, generally postmarked by January 31. The 1098 form lists the amount of interest you paid as well as any points that you paid if you purchased or refinanced the home that previous year. If you have a second mortgage, you can also deduct the interest on that loan, so be sure to gather all of your 1098s in one place when you're doing your taxes.

Open IRS form 1040 Schedule A, which is for itemized deductions. Add up all your interest paid for the tax year that is reported on your 1098 and enter it into line 10.

Add up your mortgage interest paid that was not reported on your 1098 forms. Some home buyers pay interest directly to the person they purchased the home from or to a credit card company if they used a credit card to pay part of the home balance.

Total up your mortgage interest (along with your other deductions on form 1040 Schedule A) and enter into line 29 of Schedule A. (If your deduction is limited because you have a very high income, go to page A10 in the instructions to find out what you should place in line 29.)

Bring the amount in line 29 of Schedule A to line 40 on your 1040 form ("Itemized Deductions") to be deducted from your adjusted gross income so that you can accurately calculate your total income tax.

Tips & Warnings

  • Only itemize if you believe your mortgage interest and other deductions will definitely be more than the standard deduction allowed (varies according to your filing status). Always keep records of your 1098 mortgage interest deductions. Keep in mind that if you paid interest to the previous homeowner, you have to provide information about the seller.

Related Searches

Promoted By Zergnet

Comments

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!