Mortgage Interest Deduction

Currently, mortgage interest on first and second homes may be a tax-deduction if the total value is less than $1.1 million. This is conceived as a good route to decrease tax expenses at year end. An example of owning a home after taxes with the mortgage income tax deduction included follows:

Home Purchase Price - Down Payment....$200,000 - $20,000 = $180,000 (5% down payment)
Amortization..........................30-year Fixed Rate Mortgage at 10%
Property Tax..........................1.4% of assessed home's value = $2,800

(note: assessed home value may be less or more than the purchase price of the home.

We make the assumption that the appraised value of home and purchase price of home are

equal here.)

Thus, the tax code states in this example the tax deductions for mortgage interest and property taxes are 15 percent marginal tax rate. Let's include non-housing itemized deductions, such as state and local taxes, non-mortgage interest and others, equaling $2,000. And we'll include the standard deduction to be $5,450. The standard deduction is the amount that is deducted from the total of the home ownership deductions. Therefore, your total home ownership deductions should exceed the standard deduction of $5,450. We are using $5,450 as an example only. It may be different for your particular instance. Let's look at a specific example of the Mortgage Income Tax Deduction on the home ownership expenses annually:

Home Ownership Expenses Before Taxes:

Mortgage Interest.............................$18,952.46
Property Taxes...............................+$2,800
Total of Home Ownership Expenses Before Tax...$21,752.46

Itemized Deductions:

Mortgage Interest.............................$18,952.46
Property Taxes...............................+$2,800
Non-Housing Deductions.......................+$2,000
Total.........................................$23,752.46

Standard Deduction...........................-$5,450

Total Itemized Deductions.....................$18,302.46

Marginal Tax Rate.............................15%

Total Itemized Deductions x Marginal Tax Rate = Home Ownership Tax Savings

$18,302.46 x .15 = $2,745.37

Home Ownership Expenses Before Taxes - Home Ownership Tax Savings = Home Ownership Expenses After Tax

$21,752.46 - $2,745.37 = $19,007.09

Mortgage-x. "Deducting Your Mortgage Interest Under the Tax Code." Online.
http://mortgage-x.com/brochure/deductions.htm

Best Mortgage Rates

Costs of Private Mortgages
Stop Paying Private Mortgages
Avoid Paying Private Mortgages
Mortgage Interest Tax Deductions