Is the mortgage deduction worth it?

The mortgage interest deduction allows you to reduce your taxable income by the amount of money you’ve paid in mortgage interest during the year. So if you have a mortgage, keep good records — the interest you’re paying on your home loan could help cut your tax bill.

Does it make sense to deduct mortgage interest?

The key benefit of taking the mortgage interest deduction is that it decreases the total tax you pay. Case in point: If you pay $10,000 in mortgage interest and are in the 33 percent tax bracket, you’ll lower your tax bill by $3,300 after subtracting the $10,000 deduction from your income.

Why was the mortgage interest deduction put in place?

A little over 30 years ago, the Tax Reform Act of 1986 limited the interest deductions to just mortgage interest.   The hope was that it would spur homeownership. Mortgage Interest Tax Deduction The mortgage interest tax deduction allows taxpayers to deduct interest paid on their mortgage up to $1 million in principal on their home.

Who is eligible for the home mortgage interest deduction?

Those facing the highest marginal tax rates—high-income taxpayers—receive a much more powerful tax benefit from tax deductions than low-income taxpayers receive. As a result, low-income taxpayers are less likely to itemize, placing the benefits of the home mortgage interest deduction out of reach.

Can a part owner claim the mortgage interest deduction?

If you are a part owner of the home, then you will need some form of written proof stating your ownership and the amount of mortgage interest you paid during the year. Without having written proof, you may not legally be allowed to claim the home interest deduction.

Do you have to claim mortgage interest on your taxes?

So, it doesn’t matter who receives Form 1098—if you own a qualified home with someone else and you paid mortgage interest (and itemize deductions on Schedule A), you can claim your share of the money-saving mortgage interest tax deduction.