How Does Mortgage Interest Tax Deduction Work For Homeowners

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In this blog, we will be covering how mortgage interest tax deduction works for homeowners. We will also discuss the benefits of owning versus renting. There are many benefits of home ownership. There are many benefits to being a homeowner. Homeowners do not need permission to remodel. You do not have to worry about the landlord not renewing your lease. Your monthly housing payments will not change unless the property tax and/or homeowner insurance changes. You will not be told what to do by the landlord. In the following paragraphs, we will cover how mortgage interest tax deduction works for homebuyers and homeowners.

Benefits of Homeowners Versus Renters

Homeowners can get mortgage interest tax deduction.

The can do the following without asking for permission by their landlord:

• need to paint walls
• put up wallpaper
• have pets
• no restriction on dog size
• privacy
• potential of appreciation
• last but not least, the ability for mortgage interest tax deduction

How Mortgage Interest Deduction Work For Homeowners Versus Renters

Renting an apartment or home does not give the benefit of deducting rental payments on income taxes. However, the interest payment on home is a tax-deductible line item on income taxes. Say a renter is currently renting a home for $1,500 per month. None of that $1,500 can be deducted on income taxes. Say a homeowner has housing payment of $1,500 per month. But out of that $1,500, $100 is principal and $1,400 is mortgage interest.

The $1,400 mortgage interest payment is deductible on homeowners federal income taxes. That can be huge savings for homeowners. The Internal Revenue Service allows mortgage interest tax deduction if the mortgage interest is from a secured loan. All mortgage interest is secured from the homeowner’s home.

How Much Mortgage Interest Can I Write Off

I am sure that many heard that one of the main benefits of owning own home is homeowners can write off mortgage payments.  But what does writing off mortgage payments actually mean? Whether a person is a renter or homeowner, they have a monthly housing payments. Either make to landlord or mortgage company. Renters renting, monthly rent cannot be used as a write off on tax returns.

Can Renters Write Off Rent Payments?

Renters cannot claim monthly rent payments as an expense on tax returns. However, a homeowner with mortgage secured by home part of housing payment can be used as a tax deduction on federal income taxes every year. Monthly mortgage payments consist of principal and interest.

On a 30 year fixed rate loan, homeowners will most likely pay interest on the first half of their mortgage loan term. For example, if the mortgage payment is $1,500 per month, the principal payment can be $50 and the mortgage interest payment can be $1,450. The interest portion of monthly mortgage payment is tax deductible and you can claim it as a mortgage interest tax deduction on federal tax returns.

FORM 1098 Provided By Mortgage Companies

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