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Is the interest portion of a mortgage payment tax deductib

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Is the interest portion of a mortgage payment tax deductib le?
Submitted: 6 years ago.Category: Tax
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10/3/2011
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 years ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

Thank you for requesting my assistance. Yes, the interest as well as property taxes are tax deductible. Please note that the deduction is not a dollar for dollar deduction. It is a percentage.
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Tax Professional: Tax.appeal.168, Tax Accountant replied 6 years ago
In addition to what I previously wrote, points and depreciation is deductible as well.
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Customer reply replied 6 years ago
Hi Angela,

What the deduction is a percentage of what? How exactly does that work?
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 years ago
Hello again,

To accurately calculate the numbers you have to take into consideration the total amount of your itemized deductions, as itemizing is the only way that you can take the mortgage interest deduction. Please note that tax deductions are not tax credits. Tax deductions reduce your taxable income BEFORE you calculate a tax liability on that income. Tax credits, however, are applied after your tax bill has already been calculated. At that point, tax credits are similar to payments that reduce your tax bill on a dollar for dollar basis. What this means is that the deduction is not on a dollar for dollar basis. The mortgage interest deduction is a percentage.

According to the tax code, this homeowner's deductions for mortgage interest and property taxes would be evaluated at a 15 percent marginal tax rate. Non-housing itemized deductions (i.e., state and local taxes, non-mortgage interest and so on) is estimated at $2,000 and the standard deduction for 2011 is $ 5,800 for individuals whose filing status is single or who file married filing jointly and $11,600 for couples who file married filing jointly. You can figure what your own costs and savings will be by substituting your own tax figures for those on the chart.

Listed below is an example of how the mortgage interest deduction is calculated. Again, because I don't know what your itemized deduction amount is, there is no way to accurately calculate the numbers at this time. Itemized deductions are reported on the Schedule A. SEE BELOW

http://www.irs.gov/pub/irs-pdf/f1040sa.pdf

--------------------------------------

Homeowner Profile

Gross Income..............$200,000
House Price/Mortgage Size.$950,000 - $450,000 down = $500,000
Loan Type.................30-year Fixed Rate mortgage at 4.6%
Property Tax .............$9,600
Filing Status.............Files jointly/two exemptions

Example of the impact of the Mortgage Income Tax Deduction
on Annual Homeownership Costs:

Before Tax Homeownership Costs:

Mortgage Interest........................$23,000
Property Taxes...........................$ 9,600
Total of Before Tax Homeownership Costs..$32,600
Itemized Deductions:

1. Homeownership Deductions

Mortgage Interest..............$23,000 (yearly based on the loan amt.)
Property Taxes.................$ 9,600 (yearly)
Non-homeownership Deductions...$ 2,000 (yearly)
Total..........................$34,600

2. Standard Deductions=$11,600 (MFJ)

Total Itemized Deductions=$???

Multiply TOTAL Itemized Deductions by Marginal Tax Rate (15%) to get Homeownership Tax Savings:

$??? x .15 = ???

After Tax Homeownership Costs = Homeownership Tax - Before Tax Savings.

Please note that over the years the mortgage interest amount will change due to you paying it down, but as with most mortgage loans, the interest is paid at the front end. The majority of your payments will be going towards interest instead of your principal in the first few years of the loan.
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Tax Professional: Tax.appeal.168, Tax Accountant replied 6 years ago
the standard deduction for 2011 is $ 5,800 for individuals whose filing status is *single or who file married filing jointly and $11,600 for couples who file married filing jointly.

CORRECTION:

*single or who file married filing jointly --s/b who file married filing SEPARATELY.
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