Hello,
I have a few questions. I recently purchased a house in November of 06. I was told that I could write off my mortgage payment payment because it's interest only for the first 5 years. This doesn't make sense, is this correct? I don't see how this could be, wouldn't this mean that I would be living in my house essentially free?
2007-01-13 16:16:34 · 7 answers · asked by Tony B 1 in Business & Finance ➔ Renting & Real Estate
jamaica has the best answer as it relates to the interest reducing the number of dollars you pay uncle sam each year you pay your interest-only loan. when you begin to pay interest plus principle, only the interest portion (shown on an annual amortization schedule that your lender should give you each year) is tax deductible.
realize that not only is the interest you pay on your loan tax deductible, but so are the real estate taxes. still, jamaica points out how your tax bracket affects how much of x dollars you really deduct (not all the interest, but a percentage of it).
you can do this not only with your primary residence, but also with the interest and real estate taxes you pay on a secondard residence.
2007-01-13 17:10:28 · answer #1 · answered by Louiegirl_Chicago 5 · 0⤊ 1⤋
Hard to tell, without knowing what your deductions are. Your taxable income if you took a standard deduction would be $35,500. If both kids are under age 17, that would leave you with federal income tax of $2756. This would be further reduced if you itemize, and/or have a child care credit or any other credits or adjustments. It's pretty unlikely that you'd get EVERYTHING back that was withheld for federal income tax. But even without any additional reductions, you'd get back well over $5000. You might want to consider changing your W-4 so you get your money through the year rather than loaning it interest-free all year to the government.
2016-05-23 23:11:24 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You Will be able to write off only the interest you pay when you make your mortgage payment. The payment usually consists of three parts-principle-interest and escrow. The interest is the bulk of your payment for the first 5-10 years.
2007-01-13 16:24:13 · answer #3 · answered by Anonymous · 0⤊ 1⤋
You should get a form 1098 from your mortgage company each year telling you how much interest you paid. If you are in the 25% tax bracket and you have $10,000 of interest expense, your tax savings would be $2,800, so your home would not be free.
2007-01-13 16:28:35 · answer #4 · answered by Homeslice 4 · 0⤊ 0⤋
No dude. Writing off your mortgage payment is just reducing your tax by some amount * your tax rate. You don't benefit from the entire amount. Lets say for those 3 months, you paid $3000 in interest. If your effective tax rate is 20%, then you're reducing your taxes by 20% of $3000, or $600.
2007-01-13 16:24:33 · answer #5 · answered by Anonymous · 2⤊ 1⤋
You can claim your interest and taxes paid on your home for as long you file taxes and claim the deduction. But if the standard deduction is higher than what you pay in interest and taxes then you would use the standard deduction. There other items you can use too but I will not go into those. But over all if the standard deduction is higher than your itemized deduction then you would stop itemizing and use just the standard deduction. What the others have mentioned about the interest not being dollar for dollar but what your tax bracket is that is correct.
2007-01-13 16:40:39 · answer #6 · answered by don't_leave_ur_equity 1 · 0⤊ 1⤋
Umm, no....your lender should send you a statement pretty soon saying how much you paid in interest...that's what you can deduct
2007-01-13 17:00:02 · answer #7 · answered by gary d 3 · 0⤊ 0⤋