Mortgage Interest Tax Deduction
If you own your home and have a mortgage it usually pays to take the mortgage interest tax deduction on your income tax return.
You can deduct the mortgage interest on you primary residence, your second home mortgage, or a home equity loan.
You must meet the following criteria to qualify for the Mortgage Interest tax deduction:
- You must itemize your deductions.
- The Mortgage is secured by a home, which includes: house, condominium, cooperative, mobile home, boat or recreational vehicle (must have sleeping space, a toilet and cooking facilities).
- You must be the person legally responsible for the mortgage and making the payments.
- You may not deduct more than the Fair Market Value of your home.
In January you will receive a form 1098, a mortgage statement from your financial institution stating the exact amount you have paid in interest this year and your mortgage points. If you have refinanced your mortgage this year, your closing statement will show the points (if any) you have paid.
The following items are additional fees you may deduct as mortgage interest as long as the charge was not for a specific service in connection with your mortgage loan.
- A late payment charge
- A prepayment penalty (if required to pay a fee for paying your loan off early).
When owning a home there are more tax deductions available to you other than just the interest paid, for example: property taxes and the points you used to obtain your mortgage may qualify as another tax deduction.
If you are required to pay for points to obtain your mortgage these are usually tax deductible as mortgage interest. Other terms for points that qualify are: loan origination fees, maximum loan charges, loan discount and discount points.
Points that are charged for specific services such as a mortgage note, appraisal fees, or notary fees are not interest and are not tax deductible.
Visit TurboTax Online today to learn more about mortgage interest deductions and other home owner tax breaks.
Filed under: Financial Advice