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How do I find out what deduction I’m getting on my mortgage interest rate?

By admin on December 1, 2011

Is there somewhere i can find out on my tax documents? I have a 3.25 fixed rate 0000 loan and i’m in the 25% tax bracket. What kind of deduction do you all think i would get?

Posted in | Tagged , , , , , | 3 Responses

3 responses to “How do I find out what deduction I’m getting on my mortgage interest rate?”

  1. Top Gun
    Top Gun
    December 1, 2011 at 8:10 am |

    With the OBama, the tax deduction will be abolished for mortgage interest this year ! Check with Internal Revenue for year 2012. Good Luck !

  2. the tax lady
    the tax lady
    December 1, 2011 at 8:12 am |

    Get out your tax return for 2010. Turn to page 2. See the 2nd line down? That’s schedule A.

    Now pretend to remove the mortgage interest from schedule A and recalculate your taxable income, looking up the tax in the tax tables.

    Alterntely, $300,000 * .0325 = $9750 per year. That’s more than the single standard deduction of $5800. (I did not include your property taxes). 9750 – 5800 = 3950 * .25 = $987.50 “saved.”

  3. Kelbear
    Kelbear
    December 1, 2011 at 8:58 am |

    The mortgage interest rate deduction is an “itemized deduction” on your tax return. Essentially you can reduce the income you’re taxed on by the amount of money you’ve paid in mortage interest.

    However, all taxpayers take either a “standard deduction” of $5,700 (if single) or $11,400 (if married and filing joint). OR you take the total of your itemized deductions if this total amount is greater.

    So if I am single and I make 50k a year, and I paid mortgage interest of 5,000, and I have no other itemized deductions. I could reduce that 50k by the greater of my standard deduction of $5,700, or my itemized deduction of $5,000. Obviously I will take the stardard deduction to reduce my taxable income to 44,300, instead of taking my itemized deduction which only reduces my taxable income to 45k.

    HOWEVER, if I paid enough medical expenses to result in an itemized deduction of 1,000, my total itemized deduction of 6k would be higher than my standard deduction of 5,700, and then I will take an itemized deduction instead to reduce my taxable income to 44k.

    So as you can see, the actual benefit you get depends on how many itemized deductions you have. If you already have $5,700 or more of itemized deductions(i.e already past the standard deduction), then all the additional itemized deduction you get from mortgage interest paid is just gravy on top. So if you had 5k in mortgage interest paid on top of the existing $5,700+ itemized deduction, you save 25% of that, for a reduction of $1,250 in taxes paid.

    So there are several factors to consider here that make it impossible to say how many dollars you’d actually save as a result of mortgage interest paid. I don’t get any benefit at all from my mortgage because I can’t add up more than $11,400 in itemized deductions, so I just take my standard deduction(married filing joint) like always.

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to find out the interest rate deducted