By letting you subtract when filing your income tax homeownership promotes. The mortgage provider reports to the IRS all the mortgage interest you paid in a tax year (January 1 to December 31) and sends you a statement of overall interest paid in a Mortgage Interest Statement, Form 1098. The part of the mortgage is not tax deductible. Mortgage interest can substantially lower your tax obligation.
By entering filing status, income and deductions on the appropriate 16, complete IRS form 1040. Use the standard deduction, or, even if you itemize on Schedule A, use your itemized deductions, less mortgage . Calculate refund or tax because of using the tax graphs as well as your income. Call this total A.
Prepare a second 1040, using your own mortgage interest (reported to you on Form 1098) as part of complete itemized deductions. Use your income and the tax graphs to ascertain refund or tax due. Call this
Subtract total B in complete A. The difference is the tax savings on account of the mortgage interest deduction. By way of instance, in the event that you owed $15,000 in taxes with no mortgage interest deduction (A) and $3,000 with the mortgage interest deduction (B), your tax savings is $12,000 ($15,000 minus $3,000).