There are many benefits to owning a home. If you are a homeowner who is looking for how to pay less taxes, the mortgage tax deductions are worth exploring. Your accountant can help you itemize your Schedule A deductions, and one of those deductions is based on interest paid on the mortgage.
Deductibility Requirements for Mortgage Interest Tax Breaks
There are several requirements that need to be met to qualify for these tax deductions, and your CPA can help you determine if you meet these requirements. For example, the interest must be paid on a loan that is secured by your main house or a second house that you own for personal use.
Several types of loans qualify for this kind of tax deduction:
- First and second mortgages
- Home equity loans
- Home improvement loans
Even if the money is obtained for another purpose, the interest can still be tax deductible if the loan is secured by the home. For example, some people use these loans to pay off credit card debt, buy a car, or go on vacation. Using the loan in this way allows you to keep the interest deductible on your taxes. The loan is limited to a debt amount of $1 million, and this dollar threshold changes if you are married but filing separately.
It is possible to qualify for larger loan amounts as home equity debt, as long as the money was used to build, buy, or substantially improve the house.
Another way that you can leverage home costs for tax benefits is by deducting the amount of mortgage interest premiums. There are limits to the amount of interest deduction that you can take, so it is best to work closely with an experienced CPA who can help you understand the deductions that you qualify for. Contact us for more information about how you can pay less taxes by using your home mortgage tax breaks.