What percent of mortgage interest and property tax can I deduct on my 2006 tax return?

Question

I paid $17,465.65 in mortgage interest this year and paid $2,665.42 in property taxes, I make $52,000 a year.

Answer 1

You can deduct all of it, the mortgage interest and the property taxes if you (and your spouse) are the sole name on the title and nobody outside of you or your spouse can claim these deductions on their personal return. Personal residence mortgage and interest go on the Schedule A. If you have a home office, you can allocate some of these expenses to your business based on square footage to offset self-employment tax (Social Security and Medicare) on your Schedule C and put the rest of it on Schedule A (Itemized Deductions).

If the mortgage and taxes are for a rental, you put the deductions on Schedule E and deduct them against rental income.

Answer 2

$17k is a lot of interest. If the principal exceeds $1 million the amount you can deduct will have to be restricted. The property taxes are deductible to the extent that they are based on the value of your property and do not include any flat rate fees.

Answer 3

Skip is mostly right, but 17K is not a lot of interest. Presume a $1M balance at 5%, and you're looking at $50,000 of interest a year.

As long as your average mortgage balance does not exceed $1.1 million for the year, you can deduct all of the interest. In addition, you can deduct all of the property taxes, assuming you are not in alternative minimum tax (AMT).