Tax deductions are used to write off a certain portion of your annual tax dues. There are numerous Federal tax deductions that one can acquire, and those derived from mortgage interest payments, are some of the most substantial.
This guide explains how you can attain tax savings from a mortgage loan and the qualifications to be able to receive the deduction. You can also view our tax deduction calculator to estimate your mortgage tax deductions for each year of the mortgage loan.
Reduce Taxes: Mortgage Qualifications
There are certain criteria you has to meet in order to be able to deduct your mortgage loan interest payments from your yearly Federal tax returns. The first is that you have to be eligible to complete a 1040 Form when filing taxes (almost all individuals in the U.S. is eligible), then filling out the itemized deductions portion on Schedule A of the 1040 form. The next qualification is that the individuals seeking the mortgage payment deduction is the one liable for the loan, meaning you are not paying the mortgage of another person (in which case the mortgage would be under their name). Lastly, you must be paying a mortgage on a qualified home, or a property with functional sleeping, cooking, and toilet stations (which shouldn’t be a problem).
Reduce Taxes: Interest Deduction Facts
After checking the boxes for the above mentioned requirements, there are some additional details you have to be aware of when trying to deduct your mortgage loan interest from your Federal tax dues. First, you can only deduct mortgage loan interest on a primary residence as well as one secondary home, meaning a maximum of two properties. Second, you can only deduct up to the first $1 million of a mortgage loan.
Reduce Taxes: Mortgage Deduction Calculator
Using a calculator you can determine how much you can reduce taxes. To compute your tax deduction schedule, you first need to determine the size of your mortgage loan. Second, you need to know the interest rate that you are paying on the loan (either through estimate or getting a quote from a mortgage lender). The third element is the term of the loan, which is usually 15 years or 30 years (it doesn’t matter if it is fixed or variable). Lastly, you need to know your tax bracket, which has its own year-to-year changes, but is very simple to figure out, by looking up online.
|2015 Taxable Income Brackets and Rates|
|Rate||Single Filers||Married Joint Filers||Head of Household Filers|
|10%||$0 to $9,225||$0 to $18,450||$0 to $13,150|
|15%||$9,225 to $37,450||$18,450 to $74,900||$13,150 to $50,200|
|25%||$37,450 to $90,750||$74,900 to $151,200||$50,200 to $129,600|
|28%||$90,750 to $189,300||$151,200 to $230,450||$129,600 to $209,850|
|33%||$189,300 to $411,500||$230,450 to $411,500||$209,850 to $411,500|
|35%||$411,500 to $413,200||$411,500 to $464,850||$411,500 to $439,000|