Information about Mortgage Tax Deduction

One of the most important benefits of home ownership is the mortgage tax deduction. The interest that is paid on a mortgage is tax deductible at the end of the year. The lender sends the homeowner a form 1098 showing the amount of interest paid along with any points paid down from the interest rate. Then, once you file your returns, you can write off the interest and use it as a deduction. Most people are only offered a few deductions. The most common are child care credits and mortgage deductions.  

When a borrower purchases a home, they have the option to "buy down" their rate and must pay points for that option. If the seller pays the points, which often happens, the buyer still gets to take advantage of the deduction. Paying close attention to the 1098 for those points is very important. If the 1098 is not correct, ask your lender to amend it and make the appropriate changes. You can also track your interest on your monthly mortgage statements. The lender should provide you with a breakdown of interest, escrow and principal loan balance reductions. In order to take the mortgage tax deduction, taxes need to be itemized, so tax payers need to have a few other deductions for this to work effectively.

The person taking the deduction must also be the person legally responsible for the loan. Anyone else making payments for another person cannot claim the deduction. Speak to a tax professional for more help with how to claim the mortgage tax deduction because the tax savings can be significant.