How does mortgage interest work when dealing with tax returns?
April 24, 2008 by admin
Filed under Questions and Answers
holder_account asked:
How does a mortgage work when dealing with tax returns?
How does a mortgage work when dealing with tax returns?
Do we get back all the interest that we pay off or a certain percentage?
Please provide backup in your answer.
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Incognito on Mon, 28th Apr 2008 2:10 am
At the end of the year, you will receive a statement from your mortgage company showing the amount of interest you payed on your mortgage for the tax year. This is a deduction from, or a reduction of, your adjusted gross income. It’s not a tax credit. For example, if you made $50K, and your mortgage interest was $5,000 for the year, your taxable income would then be $45K instead of $50K. If your tax rate is 10%, your tax liability, or the amount you owe, would be reduced by $500. You will have to file a 1040 form with a schedule A.