The house mortgage tax deduction lets you decrease your taxable income from the amount you paid interest on your mortgage from the last year. According to the”Wall Street Journal,” the home mortgage deduction saves Americans $100 billion a year in earnings. The house mortgage tax deduction is inserted if they amount to more than the standard deduction, to the rest of your itemized deductions, which can be claimed rather than the standard deduction.
Identification
Each year, any creditor to whom you have paid home mortgage interest must provide you with a copy of IRS Form 1098, also called the”Mortgage Interest Statement.” This form lets you know the amount in mortgage interest you paid over the year. If you bought your house in the last year and compensated”points” of prepaid interest to get a better mortgage rate, that amount will also be identified. Form 1098 lets you know how much you paid in mortgage insurance premiums. Most lenders require this insurance to be paid for by you when a mortgage loan exceeds 80 percent of your home’s value. The IRS treats these insurance premiums because of tax-deductible mortgage interest.
Claiming
You must itemize your income tax deductions, to claim the mortgage interest deduction. To do this, file the IRS 1040″long form” and fill out Schedule A. You cannot itemize deductions with simplified form 1040EZ or the form 1040A. Mortgage interest, points and mortgage insurance premiums go from the”Interest You Paid” section of Schedule A.
Types
You can claim a deduction for mortgage interest on up to two houses: another home and your residence. The IRS includes a broad definition of”house,” which can apply to a house, owned flat, condominium, recreational vehicle, ship or whatever else which has a sleeping place, cooking area and a bathroom.
Qualifications
To get a loan to qualify as a mortgage eligible for the interest rate, it must be secured from the house itself meaning the house serves as collateral for the loan. In the event the lender couldn’t waive your house if you defaulted on the loan, then the loan isn’t secured by your house and consequently isn’t qualified for the deduction.
Limits
The IRS defines mortgages as either”home acquisition debt” or”home equity debt” Qualifying loans taken out to buy, build or make improvements to a house are considered home acquisition debt. You cannot claim an interest deduction for more than $1 million at home acquisition debt, initially and second houses combined, in any given calendar year. A qualifying loan which was used for something aside from buying, building or improvements is considered home equity . You cannot claim an interest deduction for more than $100,000 in home equity debt in any given calendar year.