Are US Mortgage Deductions What You’re Looking For? Read this then!

For homeowners who are eligible to avail  the mortgage interest deduction, it is a tax break. But it is especially useful for first-time homebuyers and investors intending to buy real estate as a long-term investment or even someone just starting out in the gig economy. The deduction is considerably more advantageous if your home equity is high

Mortgage interest is deductible if you own a home and you itemize your deductions, therefore you should utilize this benefit. Although interest on any residence may be deducted, the maximum amount that can be claimed is $750,000. You will need to take the itemized deduction on your tax return.

The application of the mortgage interest deduction

Keep track of every dollar you spend on interest since you can write off up to $1 million of it as a self employed mortgage tax deduction. Keep in mind that the mortgage interest deduction is not meant to be utilized as a tax shelter. Not every taxpayer is eligible to deduct mortgage interest to the fullest degree possible.

Only the loan’s interest, not its principal, is eligible for the deduction. You can determine how much you pay in mortgage interest annually by using the information provided in each month’s interest report for the home loan. You can utilize the interest you paid to lower your taxable income for a particular year.

If you purchased your primary residence or a second home after December 15, 2017, only then is the $750,000 exception applicable. You would need to decide which home would serve as your primary residence and which would serve as your secondary residence if you bought a primary residence that had not previously served as your primary residence and turned it into a second home.

Being able to claim a mortgage interest deduction

If you are the primary house buyer, the IRS now permits you to write off mortgage interest as a business expense. The primary location of the business is the homeowner’s residence (e.g., a bar or restaurant).

A home is a piece of real estate that is being used to secure a mortgage. If the mortgage is secured by a residence, it makes no difference if the property is a co-op, apartment, or a one- or two-family house.

The interest you paid on a loan may be deductible if you have a mortgage or other loan on the property and use it as your principal residence. If the property is used for ten percent more of the rental period, you may also deduct interest on the loan.

Prior to claiming this deduction, it would benefit if you also held a current mortgage. The entire purchase price of a primary house is deductible from your income. You cannot, however, deduct interest from a new loan if you are refinancing your house or getting a second mortgage.

You do not have to report home mortgage interest as income if you are an active-duty member of the U.S. armed forces, get a nontaxable housing allowance from the military, or are eligible for a government housing aid program. You are still permitted to deduct the interest you spent on a home even if you purchase it using a nontaxable housing allowance.

You can still receive a penalty if you pay off your mortgage early even though they are typically only applied when a payment is missed or another default occurs. If you could provide a valid reason for your deduction, you could still use it.

Your place of residency at the conclusion of the year will determine how many points you are eligible to subtract. Interest rates do not change because the majority of mortgages are fixed. The change in interest can still be written off if your mortgage rate increases. If the rate does decline throughout the year, though, exercise caution. If the mortgage you have has a variable interest rate and you had to change your loan to lower your interest rate, you might be able to claim a loss on your taxes.

When will the mortgage interest deduction be ineffective?

One of the most significant financial commitments you can make is homeowner’s insurance. If the provider of your insurance refuses your claim because they don’t offer homes insurance, don’t be shocked.

The majority of the time, closing costs cannot be deducted as a business expense by an individual. These expenses are not tax deductible if a firm files a return and a business cannot deduct them. When the expenses are incurred, they must be paid as they will be recorded as an item on the business’s income statement.

Transportation, accommodation, and other non-essential costs are not tax deductible while you are serving in the military.

Similarly, you cannot deduct the amount that has been prepaid or forgiven.

In 2022, the following are the principal methods through which you might benefit from the mortgage interest deduction:

  • If your lifestyle is highly deductible, the standard deduction is a great method to cover all of your bases because it is not dependent on your income. If you’re just starting out, the standard deduction is a great approach to make sure you’re covered because it is also the same regardless of your age.
  • For instance, a single taxpayer with an AGI of $200,000 or more would only be able to deduct $12,500 from their income.
  • A married couple filing jointly who makes $25,100 or more may qualify for a greater standard deduction.
  • Married couples filing separately are entitled to a $12,550 standard deduction for the 2022 tax year.
  • For household heads, the standard deduction has a cap of $18800.

It’s important to remember that itemizing deductions significantly lowers your overall taxable income, which will help you pay less in taxes overall. Just because you didn’t itemize, you can still benefit from lower tax rates on your taxable income by deducting things like mortgage interest, charitable donations, and medical costs.

Submitting the mortgage deduction application form

The lender for your mortgage or the servicer who provided the mortgage probably gave you a 1098 Form in the mail, like the majority of people, but if you didn’t, don’t be concerned. Getting in touch with the business will still get you a copy of the paperwork. To receive a check for the amount of interest you paid, you must give the form to your tax advisor, who will then deliver it to you. But keep in mind that anything over $600 is seen as a taxable event, similar to a large purchase, and will have an effect on your tax return. Also available for free from the IRS is a copy of your 1098.


You can determine how much interest on a specific loan can be written off using the mortgage interest deduction calculators or even a 1099 tax calculator. Additionally, doing your taxes this manner is a terrific approach to boost your odds of doing so without incurring additional tax obligations. The nice news is that FlyFin can assist you even if you aren’t quite finished filing your taxes with them yet or want help with self employment taxes. Since you have your pay stub, you need to put on the mortgage balance and subtract interest in accordance with IRS standards.

Kokou Adzo

Kokou Adzo is a seasoned professional with a strong background in growth strategies and editorial responsibilities. Kokou has been instrumental in driving companies' expansion and fortifying their market presence. His academic credentials underscore his expertise; having studied Communication at the Università degli Studi di Siena (Italy), he later honed his skills in growth hacking at the Growth Tribe Academy (Amsterdam).


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