What is the Mortgage Interest Tax Deduction?
Tax season brings with it a lot of concern and worry. You may be stuck having to pay a huge tax bill or you may find that you get an unexpected return. No matter your situation it is always best to take advantage of all of the tax breaks that you qualify for. Many homeowners are familiar with the Mortgage Interest Tax Deduction, while many others may not be very familiar with the requirements. It is best that you learn as much as you can about the Mortgage Interest Deduction as it can bring a huge addition to your tax return or a huge deduction to the amount you may have to pay back. The mortgage interest tax deduction got its start right along with income tax in 1913. It is a federal tax deduction you can take for the interest you paid on mortgage loans. It is calculated yearly. Even though the definition may sound straightforward, there are a few requirements that have to be met in order for you to claim a mortgage interest tax deduction.
The total amount of interest paid on mortgage loans for the year can be used as a tax deduction in certain situations. Every situation where interest is being paid on mortgage loans does not render you the opportunity to use it as a tax deduction. You must file your taxes on a 1040 form and you must also use a Schedule A to itemize your deductions. Another requirement is that you are the actual borrower on the mortgage loan. You can�t use the Mortgage Interest Tax Deduction if you were paying on a mortgage loan for someone else. You have to be the person that the mortgage company holds liable for paying back the mortgage loan. And lastly, to be considered qualified to receive the Mortgage Interest Tax Deduction, you must be making payments on a mortgage loan for a home that is �qualified�.
A home is considered to be a �qualified� home if it has sleeping quarters, cooking quarters and toilet quarters. The Mortgage Interest Tax Deduction can be used for interest paid on mortgage loans for your primary residence as well as a mobile home, a second home, a trailer, a condo and even a boat as long as they all posses the three qualifying quarters.
Of course there are criteria that gets a little more detailed. For instance, if you will be deducting the interest paid on a mortgage loan for a rental property, you must use the rental property more than 10% of the time you rent it out. If you are going to deduct the interest paid on a mortgage loan for a second home, you can only use one second home. If you have three houses or more, you won�t be able to deduct the interest paid on the other mortgage loans and you must use your second home property for at least two weeks out of the year. It is always important that you get the guidance of a professional when you are using the Mortgage Interest Tax Deduction so that you can be certain you are doing the right thing.
