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How does mortgage interest work when dealing with tax returns?

Submitted by admin on August 4, 2009 – 11:42 am2 Comments

How does a mortgage work when dealing with tax returns?

Do we get back all the interest that we pay off or a certain percentage?

Please provide backup in your answer.

http://www.irs.gov/publications/p936/ar02.html

2 Comments »

  • Kim says:
    January 8, 2010 at 5:06 pm

    http://www.irs.gov/publications/p936/ar02.html
    References :

  • Incognito says:
    January 8, 2010 at 5:29 pm

    At the end of the year, you will receive a statement from your mortgage company showing the amount of interest you payed on your mortgage for the tax year. This is a deduction from, or a reduction of, your adjusted gross income. It’s not a tax credit. For example, if you made $50K, and your mortgage interest was $5,000 for the year, your taxable income would then be $45K instead of $50K. If your tax rate is 10%, your tax liability, or the amount you owe, would be reduced by $500. You will have to file a 1040 form with a schedule A.
    References :
    $50,000 x 10% = $5000 tax liablility

    $50,000 – $5000 mortgage interest = $45,000 taxable income x 10% = $4,500 tax liability

    $5,000 – $4,500 = $500 lower tax liability or what is owed to the IRS.

    My source is 13 years of experience filing my own taxes with the mortgage interest deduction.

    http://www.irs.gov

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