Mortgage Tax Deduction - All That You Should Acknowledge

Mortgage tax deduction permits you to minimize your taxable income by the way the amount you paid as interest in the previous year. What ‘Wall Street Journal” says, ‘Mortgage deductions saving Americans nearly 100 billion US dollars a year in taxes. Home mortgage deduction will be included to the rest of yours itemized tax deductions, instead of standard deductions they can be claimed provided if they cost to more than the normal deduction.

Mortgage Interest Statement

Any lender for whom you paid mortgage interest should supply you a IRS form 1098 copy, also called as mortgage interest statement. This form depicts the amount you paid as interest for mortgage for the past year. If your home has been bought in the last year and paid prepaid interest for getting a better mortgage rate, that particular amount will also be predicted. Also form 1098 reveals the amount you paid as mortgage insurance premiums. Most loan lenders might ask you to pay for this insurance if the mortgage loan amount exceeds more than eighty percent of your home worth. This insurance premium will be treated by IRS as tax deductible interest for mortgage.

Claim Mortgage interest deduction

Before claiming for mortgage tax deduction, a prior itemized income tax deduction is mandatory. This can be done by filing the IRS 1040 long form and schedule A should be filled in the form. You should not forget that deductions cannot be itemized with short form 1040A or form 1040EZ. Further you can find out mortgage interest and mortgage insurance premiums in ‘Interest you paid’ section of schedule A.

You can claim mortgage tax deduction on up to 2 homes, one can be your primary and other could be  a second home. If you go through the IRS form it clearly says the definition of ‘Home’, a home can refer to a house, condominium, own apartment or anything that has a area for sleeping, also may be a cooking space or a toilet.

Qualify for Mortgage Tax Deduction

To qualify for a mortgage tax deduction, it is mandatory that the home should serve as collateral for the mortgage loan, indirectly it says by the home itself. Keep in mind if the lender is not able to foreclose your home for the defaulted loan, then the mortgage loan cannot be secured by your home and obviously not eligible for the tax deduction. Also you cannot claim tax deduction for more than one million USD in home acquisition debt with first and second homes combined in any given year.