Are My Property Taxes And Mortgage Iinterest Tax Deductible?

Yes and yes

Yes and yes. Both property taxes and mortgage interest can in most circumstances be deducted from your taxes as long as you itemize deductions.

Though homeowners may strongly dislike property taxes there is a silver lining to them due to their tax advantages. You can deduct your property taxes as long as the tax is paid on the assessed value of the real property and the taxing authority, the state or local government, charges a uniform rate on all property in its jurisdiction. The tax must also be for the general welfare of the public and not a payment for a special privilege or service.

Some examples of fees paid that are not tax deductible are a unit fee paid for the delivery of a service, such as a fee per gallon of water used, and a periodic charge for a service done to your property, such as a payment for upkeep.

In order to complete take the deduction, the amount of real estate taxes you paid must be entered on line 6 of Schedule A (Form 1040).

An additional perk to owning your own home is that you are able to deduct any interest paid on up to two mortgages within some limitations. More specifically, the interest is deductible if the paid interest is on a loan secured by your main or second home. Such a loan can be a first or second mortgage to fund the purchase of a home, a home improvement loan, or even a home equity loan. As a general rule of thumb the interest can only be deducted for the year in which it was paid. In order to deduct mortgage interest you must itemize deductions, through Schedule A of Form 1040. Whether the mortgage interest is fully deductible depends on a variety of factors depending on your individual circumstances.

In order to qualify for fully deductible mortgage interest, your total mortgage balances in the tax filing year must be under $1,000,000 ($500,000 if your married filing separately). Or you could be grandfathered in if you took out your mortgages before October 13, 1987. The limit of $100,000 can be raised to $1,000,000 ($500,000 if you're married filing separately) if all of your home mortgages were taken out after October, 13, 1987 and were used to buy, build or improve your main or second home. Determining the amount that you can deduct from your gross income can be a tad complicated and if you are unsure you can ask your tax preparer or visit irs.gov for more information regarding your specific situation.

by: Frank Addessi

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