The Mortgage Interest Tax Deduction has helped millions of American homeowners stay current on their mortgage payments and remain in their homes. One of the largest and most coveted deductions in the entire U.S. tax code, the Mortgage Interest Tax Deduction permits homeowners to "deduct" the interest that they've paid on their mortgage over the course of the tax year. In other words, the deduction permits homeowners to reduce the amount of their income that's subject to taxation by the amount of interest that they've paid on their mortgage.
The Mortgage Interest Tax Deduction is subject to some important restrictions. If you're hoping to claim the deduction for the upcoming tax year, you'll need to keep these in mind. First, the IRS imposes strict income limits on taxpayers who wish to take the deduction. Although the exact cutoff amount fluctuates from year to year, you should not expect to be able to claim the deduction unless you earn less than $150,000 per year.
In addition, you must file either as a single taxpayer or as a joint household. The IRS prohibits married taxpayers who file separately from claiming many useful deductions. Unfortunately, the Mortgage Interest Tax Deduction is one such deduction. If you're experiencing a period of transition that involves a pending divorce or the recent death of your spouse, talk to your tax professional to ensure that you and your spouse can still file your taxes jointly during the coming tax year.
To claim the Mortgage Interest Tax Deduction, you'll need to procure Form 1098 from your mortgage lender. This official IRS document clearly states the amount of interest that you pay on your mortgage each year. You'll need to use this information to complete your Schedule 1040 and file your taxes properly.
In most cases, your mortgage lender will send either the official Form 1098 or a "substitute" to your home address within six weeks of the start of the new year. Unlike your bank, brokerage or employer, your lender is not required to send out official tax documentation within a fixed period of time. As such, you may need to get in touch with your lender early in the new year to ensure that your Form 1098 is being prepared. If you don't have the form, you may be able to use your lender's billing statements to calculate your total interest payments. You'll need to keep these documents on hand in the event that you're audited.