mortgage interest and tax returns?

Question

everyone is raving about the tax incentives for a first time home buyer and the tax returns on interest. On a 200k mortgage,would it be several thousands of dollars per year in write offs, or a few thousand dollars a year or several hundred dollars a year. I can't imagine it's that big of a deal.

Answer 1

Assume you are married and pay 12K in interest and another 3K in property taxes and have no other itemized deductions you would have 15K in deductions instead of 10K in standard deduction. This means you would save the tax on 3K if you pay 28% tax that is a savings of about $840. You may have enough other itemized deductions to add up to another 3K from charity and state taxes or something so save 1,680.
So it is enough to worry about but not enough to spend more on a home than you want to spend.

Answer 2

The amount of taxes you save is the total amount of your interest and real estate taxes and any other itemized deductions you have, minus your standard deduction (since if you didn't itemize, you'd get that amount anyway), times your tax bracket.

The first year of a $200K mortgage, you might save a couple thousand dollars in taxes, or more if you're in a high bracket. For later years, interest is less as more of the principal is paid down, so your tax savings are less also.

Answer 3

The real benifit is that the intrest deduction can place you in a lower tax bracket resuliting in less of a tax liability. For instance prior to buying my home I regularly got back about $500 claiming 1 with very few deducitons if any. After buying my home with the same decucitons I was recieving about $3,000 from the fed.

Answer 4

The tax write off is associated with the amount of interest that you pay each year on your motgage. You are also able to write off other home expenses. I would suggest that you speak with a licensed and qualified CPA or tax account for the best information.

Answer 5

you probably did not point out while you're unmarried, married or submitting as head of relatives. there's a different regular deduction for each project which you ought to record in. the factor is, in the adventure that your itemized deductions are no greater suitable than the regular deduction on your submitting project, there is not any evaluate itemizing your deductions. this implies that even nevertheless you have the interest paid on your loan, in case you have not have been given different itemized costs to function too it, you maximum probable won't bypass over the regular deduction besides. upload up your products. issues like taxes paid to state and scientific costs, and charitable donations can all be blanketed. (different issues additionally, yet those are the straightforward ones.) in case you have scientific assurance deducted out of your paycheck, then which could be pretax any does not count style. in case you won't be able to locate adequate issues to be larger than your regular deduction, then ignore the interest paid and in basic terms take the regular deduction. you won't be able to take the two.

Answer 6

It will vary depending on your interest rate but at say 6%, your first year write off would be almost $12,000.

That's not to say that you would get back $12,000 from the IRS. That simply means that when they figure how much tax you owe, the $12,000 would be subtracted from your taxable income.