If you don’t enjoy doing your taxes, you’re not alone. (Sometimes, it even feels feel like hot pokers under the fingernails.) But taxes can be fun when you understand how to make the best of your personal financial situations.
Savvy investors must understand the power of taking all of the deductions you can—legally, of course. These tax deductions can lower your tax liability.
What is the home mortgage interest deduction?
First, let’s define what a tax deduction is. Tax deductions are expenses you incur through the year that the IRS allows you to subtract from your taxable income. This actually lowers the amount of money you have to pay in taxes.
For homeowners, there can be some big deductions that come along with owning a home, such as the mortgage interest you pay. Bonus!
The mortgage interest deduction was designed to promote homeownership by allowing property owners to take a significant deduction. This itemized deduction allows a homeowner to deduct the interest they pay on a loan against their taxable income. You can deduct interest for:
Home equity lines of credit (HELOCs)
Home equity loans.
The mortgage interest deduction can also apply if you pay interest on a condo, cooperative, mobile home, boat, or RV used as a residence.
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