Are you looking at purchasing a home, or aren’t sure you can deduct your interest from your taxes? We’re with you. Despite the 30% of home buyers paying with cash, the majority of buyers still fall heavily into the camp of needing a mortgage.
One of the many questions new homeowners ask is, “Can you write off mortgage interest from your taxes?” We’ll answer that in today’s article and give you a better picture of different homeowner incentives.
Can You Write Off Mortgage Interest?
Yes. At least, in most circumstances, you can.
You see, in the U.S., mortgage interest is considered tax-deductible. This means when you file your taxes and have to pay a certain sum each year, you can deduct the cost of your mortgage interest from that overall payment.
This is one of many tax incentives for homeowners and is dependent on your mortgage interest rate.
How To Write Off Mortgage Interest
There are a few stipulations you must meet to write off your mortgage interest on your taxes. The first is that you must itemize your taxes, and that means not taking the standard deduction.
With itemizing your taxes, you may deduct any donations to a 501c non-profit organization, deduct business expenses, and write off mortgage insurance. These deductions lower your overall cost owed to the government in taxes.
First, know that there’s a cap. The deduction only covers the first million dollars of your mortgage interest. Meaning if your home is more than $1,000,000, you will not be able to deduct all of the mortgage interest.
That is pre-2017. If you bought after 2017, you may only deduct up to the first $750,000.
Remember that it is only the interest and not the purchase price.
Only residences count. That includes apartments, condos, mobile homes, or houseboats. To be considered a residence, it needs a bedroom, bathroom, and a kitchen.
As well, you can deduct points that you paid for the mortgage. We cover what points are and other loan options in our blog.
Finally, the amount you can deduct is dependent on your income levels. Deductions go down if your family’s adjusted income is greater than $100,000.
Other Home Owner Deductions From Taxes
A slew of other homeowner write-offs on taxes can help you reduce the annual cost of owning a home.
You can deduct your property taxes for both state and local levels, up to $10,000. Note, these properties must be in the United States.
Are you working from home? There is a good chance you’re eligible for a home office deduction.
To do this, you simply qualify for the ‘simplified’ or the ‘regular’ option. The simplified option is multiplying your office’s square footage by a prescribed rate, while the regular option requires your home office expenses.
Don’t be shrewd, however. These spaces must exclusively be used for business, and studio apartments won’t qualify for this one.
Deduct Your Interest, Enjoy Your Home
So to answer the question, “Can you write off mortgage interest?” Yes. Yes, you can.
It takes a bit of work when submitting your taxes, but getting credit for your mortgage interest is nothing more than including it into your deductibles as you would charitable donations.
Looking to purchase a new home and need a mortgage provider? Please fill out our loan application. We offer competitive rates and pricing that will ensure you can afford to live in the home of your dreams.
At 7th Level Mortgage, we are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida, including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible, and hands-on throughout the entire mortgage process.