What will the interest paid to banks on mortgages do for you when filling taxes in the United States?

Question

I bought a house about a year ago and I just recieved a form from the bank stating the amount of interest paid for the year. I found out that the bank is virtually reping us up. The interest taken for the year is five times the amount that goes towards the loan it self. Do you recieve anything back from this when filling taxes, or is there any way to go about it to reduce that big cake taken by the bank for no good reason?

Answer 1

When you take out a mortgage, the first several years of payments are mostly interest, that is the way mortgage loans work.

You can use the figure on your bank statement (1098) and include the interest paid on Schedule A. This may reduce your taxable income.

The way to reduce the interest payment is to reduce the amount owed the bank by paying the loan off early. Or refinance with a shorter term loan.

Answer 2

Your mortgage interest is deductible, lowering you taxable income. Any return is dependant upon your income, not your interest rate. The lowering of your taxable income is "something back" and the "cake" the bank takes is something you agrred to when you took out the mortgage. Interest makes up the majority of what you will pay each month for a goodly part of your mortgage period. This is also clearly written into your mortgage agreement. You are basically renting money from the bank. The reason you pay interest is because that is how the bank makes profits. Banks take in money from depositers and pay out interest to the depositers. Banks then lend that same money to people in need of loans for homes, cars, or whatever and they charge an interest rate on the money they loan. That's business.

Answer 3

I think I understand your question. In the US interest paid on a mortgage can be claimed on your taxes as a 'tax break' of sorts. There are some restrictions and you need to be able to qualify. The interest will be subtracted from your taxable income but sometimes it is better to NOT subtract it if you don't achieve a certain percentage of your taxable income.

I would recommend getting with a tax advisor (or at least purchasing a tax program) to help you out.

Answer 4

Interest on a mortgage is deductible.

You pay this money to the bank in exchange for them letting you use their money. That's the point of interest. You have to pay for the services you receive.

If you want to change the amounts, you will have to change your loan. That is how they work, though. You pay lots of interest to begin with, but it drops as the principle you owe drops. You could get a shorter loan (20 yrs. instead of 30) or a lower interest rate (if possible).

Answer 5

You should get a 1098 from your mortgage company and yes you can claim it as a deduction on your federal income taxes.