Question:

How to save from my mortgage tax interest payment?

Answer:

Mortgage tax interest payment is largely deductible if you itemize it on your tax return. That is, first mortgage interest on primary and second home is generally tax deductible for a combined mortgage loan amount of $1.1 million.

Mortgage Tax Deductible Interest Payment Savings

Your mortgage loan tax interest savings depend basically on the following:

  • Tax bracket,
  • Income,
  • Mortgage loan amount,
  • Filing status - jointly or separately,
  • Loan money used as acquisition or equity indebtedness,
  • Home loan taken before or after October 14, 1987.

Home loans taken out before Oct 14, 1987 enjoy full mortgage tax deductibility - no matter the size or purpose of the loan.

Loans made after that date are an altogether different matter regarding tax interest payment savings. You can spend $1.1 Mil to get one or two properties and make home rehab - this will count towards the total acquisition indebtedness. Or, you could use $1 Mil to purchase or rehab your properties and take out a home equity loan (HEL), in which case up to $100,000 of the HEL will be tax deductible.

If you don't have experience filing complicated tax returns, and even if you do, it is highly recommended you use the services of a professional tax advisor or Certified Public Accountant (CPA).

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Common misspellings: mortage and morgage