Mortgage Interest Deduction Or Standard Deduction – It’s important to know that the standard deduction for interest is an important expense with a mortgage. A homeowner has two options when using it as a tax-deductable expense. We have a few tips on how to file it with your return.
The interest deduction on a home is reported on Form 1040, Schedule A along with other itemized deductions such as real estate property taxes, medical expenses, and charitable contributions.
Taxpayers paying mortgage interest should fill out Schedule A to see if their itemized option exceeds their standard deduction. If so, taxpayers will save more money on their taxes by itemizing. Taxpayers who this method will need to file the Form 1040 long.
You should compare the value of your standard deduction to the total of your itemized to determine which option will save you more on your taxes.
If you have a large mortgage with a high-interest portion, you may be more likely to benefit from taking itemized deductions. Other costs of home ownership, such as property taxes, are also deductible if you itemize. You should consult with your tax planner on how to pursue.
In addition, the deduction is limited to interest on debts secured by a principal residence or a second home.
The interest is deductible on only the first $1 million of debt used for acquiring, constructing, or substantially improving the residence, or the first $100,000 of home-equity debt regardless of the purpose or use of the loan.