How To Get A Mortgage Tax Deduction
For those of you who are currently making mortgage payments, knowing how to get a mortgage tax deduction is a great financial benefit. Who would want to decline this annual money saving opportunity? Some people might believe that this process can be very complicated. Quit this negative thought! Just pay attention to my directions on getting this tax deduction and you will know this can really be done at the end!
To get a mortgage tax deduction, you will need:
- Form 1098 - Mortgage Interest Deduction Statement
- HUD1 Settlement Statement
- Publication 936 - Home Mortgage Deduction
- Schedule A - Itemized Deductions
- Instructions for Schedule A
- Worksheet to calculate the limitation on mortgage interest (Found on Page 9 of Publication 936)
- Confirm your status with the qualification requirements. You are required to fill out Form 1040 along with Schedule A. Review the Instructions for Schedule A booklet for details. The loan must be your liability, plus you must have an intention to repaid the loan! Additionally, you and your lender must have a true debtor-creditor relationship.
- Calculate the deduction limits on qualified homes. Note that the deduction amount is limited. The interest paid on your first home and second home can only be deducted! According to Publication 936, "A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities." However, if you have a third and fourth home, forget the deduction for these homes! The calculation can be done by using Page 9 of Publication 936, Form 1098 and the HUD1 Settlement Statement.
- Submit Form 1040 and Schedule A to the IRS. Before doing so, there is something you should be aware of regarding to Form 1098. IRS does not require you to send in this form. Nevertheless, you should make very sure that the mortgage interest deduction you claim on Schedule A matches the amounts reported on Forms 1098. The deduction amount may be less than the amount you paid, based on the deduction limits as mentioned earlier. It is strongly recommended to maintain Form 1040, Schedule A, Form 1098 and worksheets used to calculate the deductions for recordkeeping purposes from the tax filing date for minimum 3 years.
Now, you are all set! Tell me how complicated can it be for you to get a mortgage tax deduction? These 3 simple steps should have explained it all! It is the time for you to sit back, relax and think about what you want to do with the money you have saved from this tax deduction!