Can you write off all the interest you pay on your mortgage when you do your taxes?

Question

I have one friend that explained that all the interest you pay on your mortgage can be taken right off the top of the income when you do your taxes and you only pay tax on whats left over but i know someone else that said that your mortgage payment interest is put into the itemized section and unless it exceeds the standard deduction your better off not taking it, who is correct? Any help is greatly appreciated thanks

Answer 1

Both are somewhat correct, just saying the same thing in a different way but probably meaning the same thing. The second person has the more complete answer.

Mortgage interest is an itemized deduction, and if you have enough deductions to itemize, then the total of your itemized deductions is subtracted from your income before your taxes are figured. But since otherwise you'd get a standard deduction, and don't get that if you itemize, the only savings to you is the amount that your itemized deductions exceed your standard deduction, times your tax bracket. You take whichever is higher, the standard deduction or your total itemized deductions.

Say you are married, filing a joint return, are in the 25% bracket, and have $15,000 in itemized deductions. Your standard deduction for 2007 would be $10,700 -your itemized deductions are $4300 higher than the standard. Multiply that by .25 - you'd save $1075 by itemizing.

Answer 2

The someone else is correct. If you have a mortgage on a rental property, you deduct the mortgage interest along with other expenses against the rental income on a Schedule E, and the net profit or loss is carried over to your 1040 return. If you have a mortgage on your primary residence, the mortgage interest is reported on Schedule A - Itemized Deductions, and if your total itemized deductions exceed your standard deduction then you get a benefit from the mortgage interest.

Answer 3

Your second friend gave you an accurate answer. You benefit from the mortgage interest deduction only when you itemize your deductions.

Your mortgage interest is added to deductible medical expenses, real estate taxes, state income tax (or sales tax), charitable contributions, casualty and theft losses, and a few other miscellaneous deductions. The total is what matters. If that total is more than the standard deduction, you will have some benefit from the mortgage interest deduction.

Answer 4

Mortgage Interest is an Itemized Deduction. For most people, it is their largest itemized deduction. For most people the mortgage interest they pay helps them exceed the standard deduction but if a married couple has a small mortgage, their tax benefit will be minimal if it exsists at all.

Answer 5

certainly not $15K back. At maximum with a deduction you get a share of the deduction equivalent on your tax bracket. yet on account which you basically extremely earnings from itemizing by ability of the quantity your itemized deductions are over the known deduction, the easily tax earnings is decrease than that

Answer 6

Both are right you have to see which gives you the best return on your taxes! That's why H&R block is still in business!