How to Claim House Interest on Taxes
Claiming house interest on taxes can be a significant financial benefit for homeowners. Whether you’re paying off a mortgage or refinancing your home loan, understanding how to properly claim the interest you pay can help reduce your taxable income. In this article, we will guide you through the process of claiming house interest on taxes, ensuring you maximize your tax savings.
1. Determine Eligibility
Before you can claim house interest on taxes, it’s essential to determine if you are eligible. Generally, you can claim mortgage interest if you are the borrower or co-borrower on a mortgage loan used to buy, build, or substantially improve your primary or secondary residence. If you’re refinancing your mortgage, you can still claim the interest on the original loan amount, not the new loan amount.
2. Gather Necessary Documentation
Collect all the necessary documentation to support your mortgage interest deduction. This includes your mortgage statement, which typically shows the total interest paid during the tax year. Additionally, if you refinanced your mortgage, you’ll need the closing documents that detail the original loan amount and the new loan amount.
3. Calculate the Deduction
Once you have gathered the necessary information, calculate the mortgage interest deduction. You can deduct the interest you paid on the first $750,000 ($375,000 if married filing separately) of the mortgage debt for homes purchased after December 15, 2017. For older mortgages, you can deduct interest on the first $1 million ($500,000 if married filing separately) of the mortgage debt.
4. Complete the Tax Forms
Next, complete the appropriate tax forms to claim your mortgage interest deduction. For most homeowners, this will involve completing Form 1098, which your lender will send you, and Form 1040, the U.S. Individual Income Tax Return. If you’re claiming interest on a refinanced mortgage, you may also need to complete Form 1098-E, which provides information about the refinanced loan.
5. Consider Other Deductions
In addition to mortgage interest, you may be eligible for other home-related tax deductions, such as property taxes and points paid on your mortgage. Be sure to review all available deductions to maximize your tax savings.
6. Keep Records
Finally, keep all your mortgage interest-related documents and records for at least three years from the date you file your tax return. This will help you in case the IRS requests additional information or if you need to verify your deduction in the future.
By following these steps, you can successfully claim house interest on taxes and potentially reduce your taxable income. Remember to consult a tax professional if you have any questions or need assistance with your tax return.
