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Mortgage Interest Tax Deduction
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- čas přidán 13. 12. 2020
- The mortgage interest tax deduction is one of the largest tax deductions for homeowners. It allows you to deduct the interest you've paid on your mortgage in the past year. Not understanding how it works could cost you thousands of dollars in taxes. In this video, I explain what the mortgage interest tax deduction is, how you can qualify for the mortgage interest tax deduction, and how to determine whether or not the mortgage interest tax deduction will affect your tax bill.
What do you think of the mortgage interest tax deduction? Let me know in the comments.
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FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY. NOT LEGAL OR FINANCIAL ADVICE. The information provided in this video and on this channel is for educational and informational purposes only. It is not intended to be a substitute for legal or financial advice that can be provided by your own attorney, accountant, and/or financial advisor. Practical Personal Finance accepts no liability whatsoever for any losses or damages arising from your own personal financial decisions. You are advised to consult with your financial advisor, tax professional, or attorney regarding any and all financial decisions involving your own income and taxes.
I looked at those glasses and I knew this video was going to solve all my problems
My experience has been opposite for 2023 taxes filed in 2024. I bought my house back in 2022 and last year was the first year we made a whole year of payments. Our interest rate is 5.25% on 255k, but I benefited greatly from the deduction thanks to loan amortization. You have to keep in mind that you pay most of your interest at the beginning of the loan, so that meant that we paid A LOT of interest in our first year and we barely made a dent on the principal. This resulted in a surprisingly large return when in reality I wasn’t expecting much. Most long-time homeowners won’t see the benefit of this deduction, but first time buyers might, and those are the people who probably need it most anyway. I know I did!
I learned about this tax scam years ago when I bought my first home. I naively thought my interest would be lowering my taxes. NOPE. This tax scam should be changed. Interest should be deducted from the amount of TAXES owed, not the agi. Everytime I hear someone talk about mortgage interest tax deduction I want to tell them that it's ignorant to lump everyone into that category!! I have owned many homes and not ONE SINGLE TIME have I been able to benefit from paying interest.
Wow dude! You explained tax deduction in a way that I finally understand what it is. Much thanks!
me too
So basically we have to pick between standard deduction (~12000 for single) or mortgage deductions? I think this should be added together because we deserve standard deduction and in facts we pay interest rate if we have mortgage, we are triple taxed and it’s considered as normal
How are we tripled taxed? I am about to be a 1st Time Hm Buyer.
im a renter and still watching your video 🤗
:D
Love the editorial at the end. Important for us to be thinking about why these exist and when it’s out of date.
Yup. This is quite a popular topic but it’s been essentially useless as a tax deduction since 2018.
@@PracticalPersonalFinance at 7% mortgage rates it won't be useless lol
I was surprised by ending up paying expecting a return this year! It is clear now, the mortgage interest deduction doesn’t work for me, but the Standard deduction... I think I can do my tax moving forward. This is the last concept I was looking for got it! Big thumps up!
Thanks for watching, glad it helped!! The new standard deduction is great. It really simplified things.
I am still getting used to not being able to make itemized deductions, because the standard deduction is much higher.
Same here! Tax filing got a lot faster when they doubled the standard.
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Good info and good video. I'm a single owner on a condo but never got anything special (big$$) when tax season came around. This video helped me learn more about tax deductions so thank you!
Thank you so much for watching and I'm glad you learned something new!!
A $750K mortgage at 6% is over $40K in interest for the first couple of years. Then you have property tax that should also reduce your taxable income.
Thank you so much for the great videos. As a new tax accountant whose firm specializes in real estate, you explained it so well and helped me better understand!
Thanks so much for the video! Super helpful! Liked and subscribed!
You’re welcome Aaron! Welcome to the PPF family! Glad to have you as a subscriber.
Thank you. Your delivery of this information was 👍🏼. Great! You simplified tax code. 🙏
Making 200k this year and bought a house last month. Anual Interest paid would be just shy of 24k. Single. So I think I would benefit more from itemized tax deduction especially since I have other itemized tax deductions as well like negative realized gains from trading stocks. You know, since the standard tax deduction is 12k for single individuals. Would you agree?
Based of what he said I agree
200k your definitely tax. Any loophole
So as a married couple paying 12k in mortage interest and 3000k in property taxes. I don't get a deduction?
Do you know anything about the MCC SmartTax? So we have to participate in taking a class & counseling to get the Certificate for this?
I just entered my tax info on 1098. First time home owner. The interest and property taxes. It didn't affect it all. $0 back to me.
Seems to be a pretty common thing now. When the standard deduction was doubled back in 2017 (part of the Tax Cuts and Jobs Act), it essentially eliminated the benefits for the mortgage interest tax deduction for all except a select few with the most expensive mortgages. Personally, I think it’s better the way it is now though. Simpler and also helpful for renters trying to get to that homeowner status.
Same, and i feel disappointed
I’m confused a bit, help please!
Why is it not helpful for the average homeowner anymore? Since when and why not? I must of missed something
Thanks for watching Junior! Because the Tax Cuts and Jobs Act increased the standard deduction in 2017, most people will now take that deduction, even if they’re eligible for the mortgage interest tax deduction. It’s all minimizing your tax bill and now the standard deduction does a better job of that in most cases.
Thank you so much for this explaination
The itemized deductions may be better with these higher interest rates.
Thank you for this video.
You’re welcome! Glad you found it valuable.
The standard deduction is supposed to go back to original levels in 2025. So the math might change
Very informative!
Glad it was helpful! :D
Looking for a mortgage home tax professional to help me with taxes And save money for the future You have any suggestions
I got a mortgage of $120k in 2018 and wasn’t aware of this deduction. I specifically asked the guy who did my taxes if I could claim interest and he said not unless you’re itemizing over 5k. Wondering now if I missed out on cash. Do you feel he was mistaken and I qualify?
Hey Scott!! Thanks so much for watching and leaving this comment. Sorry it took me a few days to reply, I've been really busy this week. It depends on your situation, but I suspect your tax guy was probably on target. A big part of the reason is that in 2018, the Tax Cuts and Jobs Act went into effect and what that law did (among lots of other things) was double the standard deduction on tax returns. You have the option of itemizing all of your deductions (mortgage interest being one of the big ones) or choosing the standard deduction. The standard deduction in 2018 was $12,000 for single and $24,000 for married couples. So unless the interest you paid on your mortgage was close to or more than that amount ($12K or $24K depending on your status), you were better off taking the standard deduction.
You need to be paying enough interest a year for the itemized way to be worth it. We're talking a million dollar mortgage or more with today's interest rates.
Thanks for the great info.
So I should pay off my house because interests don’t help to reduce my taxable income as much as the standard deduction?
Hey Gerald, thanks so much for this awesome question!! If you have the means to pay off your house...I would totally go for it. Not having any debt at all, not a single payment of any kind, would be SO liberating. As long as you're still putting some money away in retirement savings, throw whatever else you can at that mortgage.
cAN YOU DEDUCT ACCRUED MORTGAGR INTEREST, MEANING NOT PAID IN THE TY???
This might be a dumb question, but when it says "loan must be secured by a qualified home", does this mean I have to already own a home and this deduction only applies to if I'm purchasing a second home? So essentially people would not qualify if the mortgage is for the first home they are purchasing?
If you only get Social Security can you file taxes for your mortgage interest, homeowners taxes and homeowners insurance?
Hey Tami, thanks for your question! In many circumstances, if social security is your only source of income, I do not believe it's treated as taxable income. Here's a page I found on the IRS website about social security income and taxes that explains the thresholds fully: www.irs.gov/faqs/social-security-income
If you don't owe any taxes, you might still need to file your tax returns, but you won't need to worry about any tax deductions for mortgage interest or homeowners taxes paid. :)
Great video, can you do one explaining section 179 for a vehicle 🚖. Thanks
Hi Luis, thanks for watching! I will definitely do a video on the Section 179 deduction in the future!
So we can't take deduction if the interest is lower than 24,000$?
In most cases, unless you have some other additional deductions which push you past that standard deduction, that is correct. The TCJA in 2017 effectively nullified this popular deduction.
great video! standard deduction it is!
can you make a video about interest tax deductions with a co-owner like how does it work please
Me and my wife made about 248k in 2021, we own 2 houses, one primary and one rental. My tax guy said I can't itemized anything cause we're make over 150k. Is that accurate?
similar situation, cpa said cannot itemized two mortgages, one for rent and one for living, but We made less than 150k. so confusing!
The >/< symbol is facing the wrong way @8:39.
Ok. I think I understand it now.
In California, houses are so expensive that I imagine most everyone here would take the mortgage interest deduction.
It’s definitely the more expensive homes that can still take advantage! Places with high property taxes still can benefit as well since those are deductible, likely bringing the itemized deduction above and beyond the standard one.
How About All Interest Being Rightfully Repaid, Because It Has Been Paid Illegally To A Third Party!
Reply
ANY BOOK I CAN PURCHASE FOR THE INFORMATION I DONT HAVE TIME FOR SCHOOL
hello, I was listening to another person on here that said a first time home buyer can deduct $15,000 from the taxes I live in Massachusetts is this true?
Hey Scott, so it is better to get the standard deduction because most homeowners pay less or equal to the standard deduction in interest? And if one pays less interest than the standard deduction, one still gets the entire deduction amount? Thank you for your videos.
Correct, use whichever one is more beneficial to you. Standard is $12,950/individual, or $25,900/couple. So if your itemized deduction is less than that amount, there is no reason so file your taxes as itemized, because you would get a larger deduction using the standardized.
What happens if you refinance?
well said!
Thank you Marcelo! :)
amazing video wow!
Thank you K T! You are too kind. :)
Great video
My question is if I own say 3 properties, but each one is in its own LLC, can each one use the 750k limit. Therefore, if I own an LLC that owns 3 separate LLCs, each one owning a home worth 750k, and I entitled to interest deductions for 2.25million?
I have my taxes and house insurance paid by the mortg company via my escrow account. Can I deduct both my prop tax and hs insurance on my taxes if that is the case?
Hey King Rob thanks for watching and for the great question! As far as I know, the interest and property tax are both tax deductible, but the homeowners insurance is not.
Is it wise to deduct interest with a 605k home? Its a 33k interest the first year
I like how nice and cute he is
So, reality here is that the Mortgage Interest Tax Deduction was designed for Middle Class Home Owners who already pay Tax on everything short of breathing, and now it will only come into play on Million Dollar homes when their owners tell their Tax Accountant that they “Donated” a million dollar painting to a Charitable Auction, painted by their friend, auction ran by their other friend, painting purchased by a non disclosed company, hung back on the wall of the insanely rich Mortgage Tax Interest break user in the same foyer it hung 3 months ago.
Subbed
You are very cute and handsome
Nah kinda vanilla lol. Not ugly not handsome lol
Dang boomers screwed us again!