How to Calculate Home Mortgage Interest Deductions
The home mortgage interest deduction is one of the most widely used tax deductions in the United States. Any homeowner can find tax relief when filing taxes. This tax deduction allows consumers to write off all mortgage interest, fees, closing costs and prepayment penalties. Calculating this figure is relatively easy, as long as you have all the necessary documentation.
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Things You'll Need
- 1098 mortgage interest statement
- Mortgage paperwork
- Mortgage statement
- Calculator
Instructions
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Calculate how much interest you paid in the previous year. Look at your mortgage paperwork. If you have a fixed-rate mortgage, your interest payments will be constant from month to month. However, if you have an adjustable rate mortgage (ARM), you'll need to contact your lender to get a full amortization table breakdown.
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Add up all interest payments in the tax year. Make sure to subtract all principal payments to your mortgage lender--these are not tax deductible. The mortgage interest paid each month should be listed on your mortgage statement.
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Compare this figure to the figure listed on your 1098 tax form. Contact your lender if there is any discrepancy (especially if the figure on the 1098 is less than your calculated number).
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Add up all other deductible items. These include: prepayment penalties, closing costs, origination and discount fees and processing fees. These fees are only deductible if they were financed in the loan, and paid in the previous tax year. Contact your lender if you're unsure about any fees.
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Add your total mortgage interest paid and all other deductible fees. This will be the figure you enter on your 1040 when you file your taxes for the previous year. It's best to speak with a tax professional before filing in order to confirm your accuracy.
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References
Resources
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
