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How much mortgage interest can you deduct on your taxes?

Mortgage interest can be one of the biggest deductions to significantly reduce your taxable income.

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Everyone wants to save on taxes, and one of the best ways is to maximize every possible deduction.

The mortgage interest deduction was a mainstay for consumers, But the past few years have changed that. Some homeowners may be better off not claiming that deduction.

You can figure out how much to deduct using a tax preparation software like e-file here.

If you want to claim it, read below to find out how it works – and whether it makes sense for you.

How to Deduct Mortgage Interest on Federal Tax Returns

When you file taxes, you can take the standard deduction or itemized deduction. In 2022, the standard deduction is $25,900 for married couples filing jointly and $12,950 for individuals. The standard deduction for those filing as head of household is $19,400.

The mortgage interest deduction is only available to those who itemize their deductions. If you take the standard deduction, you can’t deduct your mortgage interest. And because the standard deduction is so high, most homeowners are better off not itemizing their deductions.

In general, you only itemize your deductions if the total amount exceeds the standard deduction. You can do the math yourself or hire an accountant if you want more help.

You can also deduct interest on a home equity loan or line of credit, as long as the home is listed as collateral. If another piece of property is listed as collateral, you cannot deduct the interest.

Depending on the size of your mortgage, the mortgage interest deduction can be the largest deduction you make and can significantly reduce your taxable income.

Tax preparation software can easily help you determine how much to deduct. Get your taxes done right and maximize your refund here with TurboTax.

How to Deduct Mortgage Interest on State Tax Returns

If your state charges income tax, you may be able to deduct your mortgage interest on your state tax return. However, how much you can deduct and any other limits depend on the rules in your particular state.

If you want to deduct the interest, you can use the figures from the 1098 form your mortgage company sent you. If you don’t receive a 1098 form, it may mean you paid less than $600 in interest. However, you will still be able to deduct the mortgage interest. You have to calculate the total interest amount paid manually.

Some states may have a limit on how many properties you can deduct the mortgage interest on, while other states will allow you to deduct the interest on all of your homes.

How to qualify for the mortgage interest deduction

Only homeowners with mortgage debt of $750,000 or less can deduct their mortgage interest. If you’re married filing separately, you can only deduct mortgage interest if the mortgage debt is $375,000 or less.

The limit used to be $1 million, but that changed after the passage of the 2017 Tax Cuts and Jobs Act.

Second home mortgage interest deduction

if you have Two houses, you can still deduct mortgage interest on your federal taxes on a second home. To qualify, the property must be listed as collateral for the loan. You can only deduct interest on a home in addition to your primary property.

But the rules are different if the second home is a rental property. If this is the case, you can claim the discount only if you stay at the property for 14 days or 10% of the rental period. If you’ve never lived in it, it’s treated as a rental property exclusively so you can’t claim the mortgage interest deduction.

Still have more questions about tax deductions? The experts at H&R Block can help you.

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