Tax Info - Mortgage Interest Tax Deductions

Many people know that there is a mortgage interest tax deduction but do not know how it works or how to utilize it. The federal government designed this deduction to give a major advantage to homeowners on their taxes. Therefore, if you are a homeowner, you should definitely take advantage of it. Here are the basics of the mortgage interest tax deduction.

Lower Taxable Income

When you buy a home, you will be paying a large amount of interest over the life of that loan. At the beginning of the mortgage period, the vast majority of your mortgage payment will be interest. If you had a $1000 mortgage payment, there is a good chance that $950 will be interest. Therefore, at the end of the year, the interest will add up to a substantial amount. You can take this entire amount and deduct it from your taxable income.

The Process

At the end of the year, you will receive a 1098 form from your mortgage broker. It will list the total amount of mortgage interest that you have paid for the year. If you just got your mortgage this year, you might also see mortgage points paid listed on the statement. These can be deducted as well. Give this information to your tax professional or enter the deduction into Line 10 of Schedule A if you are doing your own taxes.