12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
Mortgage Interest Deductions
By Kelly WingardNFNS Columnist
If you just obtained
your first home loan, Uncle Sam has a nice housewarming present for you--bundled
in red tape, of course. The IRS allows you to deduct mortgage interest and property
taxes from your taxable income, but this benefit is tied to certain limitations
and stipulations. In the first of a
three-part series, this column explores the qualifications for itemizing your homeowner
deductions.
Itemizing Mortgage
Interest
To determine whether you can deduct your mortgage interest
and property taxes you must know your standard deduction. This deduction is
controlled by your filing status, age, and eyesight (legally blind taxpayers
have a higher standard deduction). The following table shows 2007 standard
deductions for taxpayers under the age of 65 without visual impairment:
|
2007 Standard
Deduction |
|
|
Single |
$5,350 |
|
Head of household |
7,850 |
|
Married filing jointly or |
10,700 |
|
Married Filing Separately |
Consult your tax advisor |
After you determine your correct standard deduction, total
your personal itemized deductions to determine whether you can beat this number.
If your total itemized deductions exceed your standard deduction, you win! But
you can't really lose, since you get to deduct the larger of the two numbers
anyway.
In addition to property taxes and the interest on your
primary home loan, you can deduct mortgage interest on a second home and
qualified home equity interest. The second and third columns in this series
will go over the details on these types of loans.
The following items also may be included in your itemized
deduction total:
- Medical expenses in excess of 7.5% of your adjusted gross income (AGI)
- Other taxes, including state and local income or sales taxes
- Certain points paid to obtain or refinance a home loan
- Charitable contributions
- Certain casualty and theft losses
- Certain work-related and investment costs
exceeding 2% of your AGI
This list does not include all itemizable deductions. You
should seek the advice of a qualified tax preparer to determine if other
deductions apply to you.
Source:
IRS:
Pub 936
About the Author
Kelly Wingard is a
freelance writer and a 25-year veteran tax preparer. She is a regular
contributor to the
About the Author
Kelly Wingard is a freelance writer and a 25-year veteran tax preparer. She contributes regularly to the University of Illinois Tax School training manual for tax professionals.