Can you deduct property taxes and mortgage interest? This is a common question among homeowners, especially those who are just learning about the ins and outs of tax deductions. The answer is yes, you can deduct both property taxes and mortgage interest on your federal income tax return, provided you meet certain criteria. Understanding how to claim these deductions can help you save a significant amount of money on your taxes each year.
Property taxes are the taxes you pay to your local government for the privilege of owning property. These taxes are typically based on the assessed value of your property and can vary widely from one location to another. The good news is that you can deduct the amount you paid in property taxes on your federal income tax return. To claim this deduction, you must itemize deductions on Schedule A of your tax return.
Mortgage interest, on the other hand, refers to the interest you pay on your mortgage loan. If you itemize deductions, you can deduct the interest you pay on your first and second mortgages, up to certain limits. The IRS allows you to deduct interest on loans secured by your primary or secondary home, as long as the loan was used to buy, build, or substantially improve the property.
To be eligible for the mortgage interest deduction, you must meet the following criteria:
1. The loan must be secured by your primary or secondary home.
2. The loan must be used to buy, build, or substantially improve the property.
3. The total amount of debt on all mortgages cannot exceed $750,000 for married taxpayers filing jointly, $375,000 for married taxpayers filing separately, and $500,000 for other taxpayers.
4. The loan must be taken out on or after December 15, 2017, for married taxpayers filing jointly, and on or after October 13, 1987, for all other taxpayers.
It’s important to note that you can only deduct the interest you pay on your mortgage, not the entire loan amount. The IRS provides a worksheet to help you calculate the mortgage interest you can deduct. Additionally, if you refinance your mortgage, you can still deduct the interest on the portion of the new loan that replaces old mortgage debt, as long as the new loan meets the above criteria.
When it comes to claiming property taxes and mortgage interest deductions, it’s crucial to keep detailed records and receipts. This will help you verify the amounts you paid and ensure that you’re claiming the correct deductions. It’s also a good idea to consult with a tax professional to ensure you’re taking full advantage of these deductions and following all IRS guidelines.
In conclusion, you can deduct property taxes and mortgage interest on your federal income tax return, but you must meet specific criteria and maintain proper documentation. By understanding how to claim these deductions, you can potentially save a substantial amount of money on your taxes each year. Always keep in mind that tax laws and regulations can change, so staying informed and seeking professional advice is essential.
