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Old 09-15-2007, 07:09 PM
KB4 KB4 started this thread
 
Location: New York, New York
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Is there a limit to what percentage of your income you can deduct for mortgage interest paid? Like if someone's income is $40,000 per year and they want to deduct $35,000 for mortgage interest paid, is this allowed?
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Old 09-15-2007, 07:32 PM
 
Location: Colorado, Denver Metro Area
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Remember that you are paying interest and principle. You can only deduct the interest.
While there is no limit for the mortgage interest itself, some situations may force people with special itemized deductions into AMT (Alternative Minimum Tax). That really depends on many other criteria’s that you may face on your tax return (i.e. do you have kids?).
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Old 09-15-2007, 08:14 PM
 
Location: Sacramento
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Yeah, good point. The AMT is cutting down the mortgage deductions for more folks each year.
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Old 09-15-2007, 08:30 PM
KB4 KB4 started this thread
 
Location: New York, New York
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Thanks. I know almost nothing about AMT but it seems that under AMT you can still deduct the interest paid on a mortgage used to buy your home?
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Old 09-15-2007, 10:03 PM
 
Location: Sacramento
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The AMT is a very complex tax process which makes you evaluate your deductions against a pre-set formula, designed to eliminate tax deductions and push you more towards a standard deduction. The higher your income the more likely you are to hit it.

I can't explain the details here, but would advise you to go to the IRS website and take a look at it before you go too far, it severely limited my deductions each of the past two years.
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Old 09-16-2007, 04:47 AM
 
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Your mortgage interest amount is reported to you each year by your lender. They will also file the same information with the IRS. That's all you can deduct.
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Old 09-16-2007, 06:57 AM
KB4 KB4 started this thread
 
Location: New York, New York
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Quote:
Originally Posted by NewToCA View Post
The AMT is a very complex tax process which makes you evaluate your deductions against a pre-set formula, designed to eliminate tax deductions and push you more towards a standard deduction. The higher your income the more likely you are to hit it.

I can't explain the details here, but would advise you to go to the IRS website and take a look at it before you go too far, it severely limited my deductions each of the past two years.
I had a look at IRS website. That's where I got the impression that you can still deduct interest on the first mortgage. I know that there are many other considerations.
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Old 09-16-2007, 07:00 AM
KB4 KB4 started this thread
 
Location: New York, New York
387 posts, read 1,095,450 times
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Quote:
Originally Posted by Padgett2 View Post
Your mortgage interest amount is reported to you each year by your lender. They will also file the same information with the IRS. That's all you can deduct.
Well, of course. What I wanted to know is, if someone spends most of his/her income on mortgage interest, can they deduct the whole amount.
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Old 09-16-2007, 11:15 AM
 
Location: WA
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Yes, there are limits... if all mortgages on your home total either

More than the fair market value of your home, or
More than $1 million ($500,000 if you’re married and filing separately from your spouse)

There can be limits... see IRS documentation.
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