Getting the Mortgage Interest Deduction: Itemize Your Deductions
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If you plan to take the mortgage interest deduction, you have to realize that you cannot take the standard deduction. The standard deduction is used for those who do not wish to go through the bother of toting up their deductions. Right now, the standard deduction for married filing jointly is $11,400. This means that you need to decide whether you have enough other deductions to make it worth it to itemize. (Or maybe you pay enough in mortgage interest alone to justify itemizing. Consult an accountant or tax professional before deciding what to do in any case.) If you choose to take the standard deduction, you can’t itemize — and your mortgage interest deduction becomes, in fact, useless, as MainStreet.com reports:
Imagine a couple in the 15 % tax bracket with a $200,000 mortgage. They’d pay about $10,900 in interest in the first year, saving $1,640 in tax if they itemized. But by claiming the $11,400 standard deduction instead, they could get a bigger tax saving, $1,710. For this couple, the mortgage interest deduction is worthless.
However, there are other considerations. My husband and I give to charity. That is something that goes on the itemized deduction list. These deductions are claimed on Schedule A. Other deductions include mortgage insurance premiums, job expenses that you weren’t reimbursed for, tax preparation fees, unreimbursed medical and dental expenses, and theft losses.
Instead of waiting until tax season 2010, now is the time to start preparing your taxes. Figure out how you can decrease your tax bill. One way to do that is to calculate your possible deductions. Then you can plan some of your expenditures and budget around what will help you obtain the best tax results.
Planning ahead is an important part of preparing your finances. Figure out whether you have enough deductions to make itemizing worth it. This is one of the best ways to get the most out of your home mortgage loan interest paid.
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