Call Today: 877-958-6638

La Porte Chamber of Commerce
VERIFIED Seal Success Tax Relief, LLC BBB Business Review    
Tax Deductions on Mortgage Payments

Tax Deductions on Mortgage Payments

By on Jul 28, 2014 in Tax Deductions | 0 comments

Tax Deductions on Mortgage PaymentsOwning a home has many financial benefits, but none are quite so immediate or consistent as the annual tax benefits. From the very first mortgage payment you make, you become eligible to take some fairly hefty tax deductions on your annual return, if you itemize. If you file using Form 1040 and Schedule A, the IRS allows you to deduct the interest paid on your first and second mortgage, up to $1,000,000 in mortgage debt if you are married and filing jointly. If you are married and filing separately, the limit is $500,000.

In addition to deducting mortgage interest, you can also deduct the following related expenses:

  • Home equity loan debt (up to $100,000)
  • Real estate taxes
  • Mortgage insurance
  • Refinance: In addition to the mortgage interest, you can also deduct the points that you pay to get a lower interest rate.
  • The IRS considers a property with sleeping, cooking and toilet facilities a home – this could be a house, a condo, a mobile home, a boat or even an RV. You can deduct mortgage insurance on a second home as well – as long as you do not vacation at that property for more than 14 days or more than 10% of the number of days that you rent it out.

There are several other items that the IRS does not allow you to deduct:

  • Insurance (other than mortgage insurance)
  • Utilities (water, power, etc.)
  • Depreciation
  • Down payments or earnest money
  • Settlement costs

Can You Afford to Buy? Can You Afford Not To?

So, as you think through the pros and cons of buying a home compared to those associated with renting, keep in mind that for every single mortgage payment you make on your loan, you will basically get back a portion of that payment come April. So, often, you may actually pay less per month when you purchase a home than you would renting. During the first years of a home loan, the majority of your payment each month goes toward interest and not principal, so you can deduct a sizable amount. This makes the investment in your home a true investment in your financial future.

As the American housing market continues to improve, more and more Americans will have the opportunity to improve their financial situation and take on what’s often considered “good debt”. Interest rates are still low and mortgages are relatively easy to get, so it is a really great time to try to buy (or sell) a home.

When April 15th rolls around, you will likely be surprised by how these mortgage payment deductions positively impact your overall tax return. These deductions can easily be the difference between owing thousands of dollars and getting back a few thousand from the IRS. Keeping this money in your own pocket helps with your overall financial outlook and ability to have the financial freedom that you have been dreaming of. Owning a home is a big part of the “American Dream” and these deductions are a big part of why!

If you’re concerned with these or other problematic tax questions, contact Success Tax Relief today. We can answer your questions and help you make the most of your return. If you owe the IRS money, we can also help you find your way out of debt and give you the relief you’ve been seeking.

Post a Reply

Your email address will not be published. Required fields are marked *

7 Secrets the IRS Doesn’t Want You to Know About!

Download FREE Report

We will never spam you.