Each year, millions of people in the United States complete their tax forms and send them into the IRS, and for those individuals who own their own home and pay a mortgage, they have the opportunity to utilize the Mortgage Interest Tax Deduction when they are figuring their taxes. This deduction allows an individual to offset some of the interest that they pay on their mortgage.
Federal Tax Return Deduction Rules
The Mortgage Interest Tax Deduction applies to federal tax returns. The rules and amounts that are allowed for deductions will change based on current tax laws. In fact, the Mortgage Interest Tax Deduction could even disappear if legislature provided that type of vote.
When a person utilizes this deduction, the refund that they receive increases in proportion to the amount claimed. For example, if an individual had mortgage interest payments that totaled $5000 a year and they are in a tax bracket where they pay 25 percent, they would receive an additional $1250 when they receive their tax refund.
State Tax Return Deduction Rules
The laws governing state tax returns will vary from state to state. In some areas, the Mortgage Interest Tax Deduction can only be used when taking a deduction off of a person’s federal tax return. In other states, the deduction is recognized and used in different ways.
The allowances made in some of these states regarding this deduction can help cut a person’s taxes by a few hundred dollars. Other tax filers in certain areas are given the opportunity to take a deduction on their state tax return that may even exceed the deduction that they are allowed to take on their federal tax return.
California Rules For Mortgage Interest Deduction
In the state of California, they use the same value that is on an individual’s federal tax return. In essence, individuals who are taxpayers in California can double the amount of mortgage-related deductions that they take on an annual basis.
If a person is filing their taxes in the state of California, they will need to make sure that they include proof of the value used for the Mortgage Interest Tax Deduction on their federal tax return.
This can be accomplished by including a copy of their completed worksheet in Publication 936. The worksheet is used to figure the deduction for home mortgage interest.
The worksheet in Publication 936 walks an individual through the steps of determining a qualified loan limit as well as the final amount of deductible home mortgage interest.
Jim Treebold is a North Carolina based writer. He lives by the mantra of “Learn 1 new thing each day”! Jim loves to write, read, pedal around on his electric bike and dream of big things. Drop him a line if you like his writing, he loves hearing from his readers!