I am looking for some information on how to calculate my tax write off for owning a home. I understand that it is the intrest that I pay on my mortgage that I am able to wright off at the end of the year.
In that simple understanding: I am guessing that if I had a $1000 monthly mortgage and my interest portion was $950. I would be able to deduct from my taxes 950 x 12 = $11400 at the end of the year.
Is this correct?
Any help would be apprcieted.
Thanks,
Joe
is it your residence or an investment property? rental or flip? you have many other deductions available in addition to interest.
the interest to be deducted will be reflected on the 1098 you receive from the lender.
Not quite.
You don’t pay the same amount of interest each month, unless you have an interest only loan. In your example, you have what is called an amortizing loan. Each month, the portion of your monthly payment that is applied to interest goes down while the amount applied to your loan balance goes up, although your total mortgage payment stays the same.
Your mortgage company will send you a mortgage interest statement sometime in January. Look for a Form 1098 from your lender that will tell you the exact amount of mortgage interest you paid during the year.
Mortgage interest paid for your primary residence is not subtracted from your taxes. Instead, you file Schedule A (1040) to itemize your deductions. Itemized deductions reduce your taxable income before your tax bill is computed. Along with mortgage interest, you can also deduct your property taxes on Schedule A. While other out of pocket costs are also permittted deductions on Schedule A, mortgage interest paid and property taxes paid are the only real estate related deductions allowed on Schedule A for your primary residence.
If you don’t itemize your deductions on Schedule A, then you don’t get to claim the deductions for mortgage interest or for property taxes. Some folks just don’t have enough deductions to use Schedule A, so, they default to the standard deduction.
Dave,
Thanks for your response. Question?
Your response looks like it deals with a primary residence? Correct?
What is/are the differences for an investment property?
Thanks,
Joe
Joe,
You are correct, I assumed from the wording of your question that you were specifically asking about your primary residence.
How are you using this “investment” property?
Dave,
I don’t really know what you mean when you say. “how are you using your investment property”
I have a couple of duplexes that I rent out.
Joe
OK, your investment property is being used as rentals.
For rental property, you report all your income and expenses on Schedule E (1040). Take a look at Schedule E and see all the expense categories that are available to the rental property owner to offset rental income. The depreciation expense at the end is a bonus.
Dave,
Yea, I see where you write off all expenses for an investment property. Now to my understanding that is different that the write offs for my personal residence correct? Because on my personal residence I can only write off my mortgage interest.
Also, I wanted to find out how the deperciation works. And does this work differently for a personal residence then for an investment property? If so, how?
If you know this anyway that you can put some numbers together as an example?
Again thanks for your responses.
Joe
For your primary residence or second home, the only deductions you are allowed are mortgage interest and property taxes. You can only take these if you itemize your deductions on Schedule A.
Depreciation does not apply to your primary residence or second home, only to your rental property or to property used in your business.