Mortgage Interest
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Mortgage Interest
The interest that you pay on your mortgage is tax-deductible. This deduction is one factor that has enabled millions of Americans to own their homes. One reason: the amount of each mortgage payment that goes toward interest declines each year. In the first few years, it can be as much as 90%, declining thereafter as the proportion going toward principal increases. That works in the favor of homeowners early on, when they are typically earning less than they do in future years.
Things To Know
- The mortgage interest deduction is most advantageous in the early years of a mortgage.
At the beginning of each year, you should receive a notice from your lender that states how much mortgage interest you have paid. Enter this information on your Schedule A form for tax purposes. You can take the deduction only if you itemize your expenses, as opposed to taking the standard deduction.
There are limits to your deduction. Your mortgage is fully deductible if it is under $750,000 if your tax filing status is married filing jointly. If you are filing separately, the maximum is $375,000. These are changes from the pre-2018 limits of $1 million and $500,000, respectively.
IRS Publications 530 and 936 provide more information on the home mortgage deduction.