The Mortgage Interest that you paid to acquire your first and second home can be deducted in your income tax. As you read on, you will learn how to deduct and calculate Mortgage Interest for your income tax return. Plus, you will learn how Mortgage Interest works.
How it works
The Lender sends you form 1098. The form 1098 shows how much mortgage interest was paid. Using the values from form 1098, you transfer the values to Schedule A Form 1040 of your income tax form.
Requirements for Tax Deductions
There are three conditions to meet to be able to deduct mortgage interest. First, you must fill out the Schedule A Form 1040. Second, you must be liable for the loan. Basically, the homeowner pays the mortgage payment. And, he owns the home. Lastly, the home must be a secured debt of a qualified home.
Mortgage, Deed of Trust, or Land Contract instrument secures a debt. The instrument provides a way to satisfy debt in case of default, makes the owner liable to pay debt, and records under the local state of law.
Qualified Home means house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. And, the home is first and second home of the homeowner.
Qualified Mortgages
The three categories are Grandfathered Debt, Home Acquisition Debt, and Home Equity Debt. Grandfathered Debt is acquired mortgage prior October 13, 1987. If the Homeowner refinanced the mortgage, the mortgage remains as Grandfathered Debt. Home Acquisition Debt is acquired mortgage after October 13, 1987 to buy, build, or improve a home. The total mortgage must not exceed $1 million. Home Equity Debt is acquired mortgage after October 13, 1987 not to buy, build, or improve a home. The mortgage must not exceed $100,000 of the fair market value.
IRS yearly update
This article may or not contain the most current tax regulations, and laws. You may want to consider checking with your trusted Tax Advisor or IRS.
Dennis Estrada is a webmaster of mortgage calculators website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.