Do you own a home? If so your mortgage interest deduction can help you save some money when you file your income taxes this year. There are several deductions homeowners can use to their advantage, one of which is the mortgage interest deduction.
For new homebuyers who are not versed in this deduction, the mortgage interest deduction is a federal tax deduction that will deduct interest paid on a loan utilized to build, buy, or renovate a residential property from your taxable income. In turn, this lowers the amount of money in which you are taxed on when you file your federal income tax return. The mortgage interest deduction is one of the most common itemized deduction utilized by taxpayers.
When filing your taxes, you have the option to claim the standard deduction, which subtracts a predetermined amount from qualifying taxpayer’s taxable income; or you can claim several itemized deductions. Each itemized deduction corresponds to a value which is then subtracted from the taxable income of filers. Below are the standard deduction amounts for the upcoming 2020 tax season.
- Single: $12,400
- Married filing jointly: $24,800
- Married filing separately: $12,400
- Head of household: $18,650
To save the most money on your annual tax return, choose the deduction method that is most advantageous, either itemized or standard. For example, if you are Married Filing Jointly, in a 22% tax bracket and only have mortgage interest of $10,000 and no other itemized deductions available for you to use, you would save more in taxes utilizing the standard deduction of $24,800. Not utilizing the most advantageous method would have cost you another $3,256 in federal taxes.
Do you still need some assistance understanding the mortgage interest deductions, or any other deductions that you may be able to utilize for your 2020 tax return? If so contact us today as we have consulting appointments available.
