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Mortgage Interest Deductions 101

Becoming a homeowner comes with many tangible and intangible benefits. One benefit that is often overlooked until the start of the year, is the deductions you get on your taxes. As a Texas homeowner, you can deduct the interest paid on qualified residences for up to $750,000 in total mortgage debt (the limit is $375,000 if married and filing separately). These deductions can result in a lower tax bill.

Interest paid on a loan that was used to buy, build, or complete substantial renovations on your primary or secondary home falls in the deductible mortgage interest bucket. Eligible properties can include a house, apartment, condominium, mobile home, or house trailer. Although the amount of deduction caps out at $750K, most homeowners do not reach that threshold.

At the end of each tax year, your lender will provide you with a mortgage interest statement or a Form 1098, that states the total amount of interest paid for that year. You are responsible for reporting an accurate total of interest paid when you file your taxes and you will be required to itemize your taxes. If you have purchased a home with one or more people, each homeowner can deduct the amount of interest they personally pay.

A few other payments that may count as mortgage interest and could be added to your deductible amount include:

  • Mortgage Points
  • Late Payment Charges
  • Prepayment Penalties
  • Interest on a Home Equity Loan
  • Certain Mortgage Insurance Premiums

By deducting mortgage interest from your taxes, you are reducing your taxable income. As a result, you have less tax liability and you can reduce the amount of taxes you owe, resulting in more money in your pocket! 

If you are ready to reap the many benefits of home ownership, call Michele Harmon Team today at 713-818-1330. We can help you secure and negotiate the home of your dreams!

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