What You Need to Know About Home Mortgage Interest to Get the Best Tax Deduction
Home Mortgage Interest can be a good tax deduction [http://taxdeductionsforbeginners.blogspot.com/]. Mortgage interest is reported on Form 1040, Schedule A along with other itemized deductions such as real estate property taxes, medical expenses, and charitable contributions. Taxpayers paying mortgage interest should fill out Schedule A to see if their itemized deductions exceed their standard deduction.
If so, taxpayers will save more money on their taxes by itemizing. Taxpayers who itemize their deductions will need to file the Form 1040 long form. You can get this at your local library or irs office. This form is step number one.
Now to get this deduction your debt must be secured by a qualified home. Meaning your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Before you go running to get that tax deduction here is the breakdown of what a home means.
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.
Second home. A second home is a home that you choose to treat as your second home.
Second home not rented out. If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year.
Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.
More than one second home. If you have more than one second home, you can treat only one as the qualified second home during any year. However, you can change the home you treat as a second home during the year in the following situations.
*
If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it.
*
If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home.
*
If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home.
Renting out part of home. If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply.
*
The rented part of your home is used by the tenant primarily for residential living.
*
The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities.
*
You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant.
Office in home. If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest.
And this list is only partial.However it gives you a grasp on what qualifies as a home and how to go about getting your tax deduction. Be sure to read over your IRS documents with a fine
If so, taxpayers will save more money on their taxes by itemizing. Taxpayers who itemize their deductions will need to file the Form 1040 long form. You can get this at your local library or irs office. This form is step number one.
Now to get this deduction your debt must be secured by a qualified home. Meaning your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Before you go running to get that tax deduction here is the breakdown of what a home means.
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.
Second home. A second home is a home that you choose to treat as your second home.
Second home not rented out. If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year.
Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.
More than one second home. If you have more than one second home, you can treat only one as the qualified second home during any year. However, you can change the home you treat as a second home during the year in the following situations.
*
If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it.
*
If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home.
*
If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home.
Renting out part of home. If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply.
*
The rented part of your home is used by the tenant primarily for residential living.
*
The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities.
*
You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant.
Office in home. If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest.
And this list is only partial.However it gives you a grasp on what qualifies as a home and how to go about getting your tax deduction. Be sure to read over your IRS documents with a fine