I earn $26k a year and pay $8000 in interest for my home what is my tax benefit?

Question

I will have paid this amount above for this year .how will that effect my taxes at the end of 2007 when I file. Im not sure how the interest is deducted. Please explain

Answer 1

The $8000 in home interest is all deductible as an itemized expense, as are your real estate taxes, state and local income tax if any, and a number of other expenses. At the end of the year, you'll get a form from your lender showing the total amounts. The form for itemized deductions is 1040 Schedule A - you can download the form and instructions from irs.gov - the instructions will list a number of possibly deductible expenses. Since only the portion of medical expenses that exceed 7.5% of your income, or $1950, can be deducted, you probably won't have medical expenses to deduct unless you had a very bad year medically.

You would get a standard deduction of $5000 ($10,000 if you're married filing joint), and since you get EITHER the standard or itemized deductions, only the part of your itemized amount that's over $5000 is giving you any extra money off your taxes.

With your income, you can get your taxes done at a VITA site - trained volunteers will do them, and at most sites will file electronically for you, at no cost. On irs.gov site, put VITA into the search box to find a site near you.

Answer 2

If you itemize your deductions, it means that all or some of that is deductible for income tax purposes. Also, you can include the property tax you paid for the year as a deductible expense.

Deductions are itemized on Schedule A. Look on that form for other things you might include such as medical expenses (including any insurance premiums that you paid), etc. It's best to get Sched. A and an instruction book to get a good picture. To itemize, you must file form 1040.

This site gives links to downloaded forms or you can view them online.
http://www.irs.gov/formspubs/index.html?portlet=3

They have 2005 forms up right now. You want 1040 Schedule A&B and the Instructions.

For complete instructions, order Pub. 16 (it's too long to download) which they will mail to you free. Wait until they come out with the 2006 book.

The income tax return that you file in 2007 is for the year 2006. You wouldn't be filing for 2007 until 2008.

Answer 3

Assuming that this home is your primary resident. The mortgage interest is fully deductible, as well as property tax.

If you are filing as single status, then your mortgage interest along is higher than standard deduction for single person. You should itemize. Use Schedule A and 1040.

If you are filing using other status, then you would need to fill out the Schedule A as if you are going to itemize. Compare the total amount on Schedule A against the standard deduction amount for your filing status, then choose the one that has higher deductible amount.

See Part Five of Publication 17 for all the deductible items.
http://www.irs.gov/publications/p17/pt05.html

Best wishes.

Answer 4

All interest is tax deductible. I'd say 8,000 if its all interest. The one who Carry's your note will send you a statement at the end of the year showing what you paid & how much interest. You take it to the one who prepares your taxes & the interest is taken off your gross income.

Answer 5

I would not have a house if I made 26k a year

where do you live?