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Old 03-07-2009, 10:01 AM
 
Location: Blackwater Park
1,715 posts, read 6,286,489 times
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The only way in which mortgage interest can be deducted on federal taxes is by itemizing deductions, right?

If I itemize deductions I'll probably only end up with about $5,000, at most, so it's more beneficial for me to take the standard deduction of $11,400. I only pay about $2,200 in mortgage interest annually.

I'm thinking about this b/c everyone talks about deducting the interest they pay on their home, or essentially, getting upwards of 1/3 of that money back when filing a federal return.

My original thought process was that I might get $400 or so of the $2,000 mortgage interest I paid in back when filing my federal return. Looks like that won't apply to me since I should be taking the standard deduction (if I'm correct).

Note: this for 2009 return, not the 2008 return, which I've already filed.

Thanks for any help
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Old 03-07-2009, 02:07 PM
 
10,706 posts, read 20,126,250 times
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Yes you're correct people are idiots. And so are Realtors for perpetuating the myth. Although in my case I have a lot of other deductions as a transportation industry worker so it works in my favor. But unless you pay a lot of interest a year it doesn't help you, and even if it does what sense does it make to pay $1 and get $0.25 back???
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Old 03-07-2009, 08:38 PM
 
48,519 posts, read 81,030,761 times
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If you only have that amount of course not but many have alot more interest;especailly in the first years of a mortgage;plus other deductions to file long form.
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Old 03-07-2009, 10:22 PM
 
Location: Sacramento
2,568 posts, read 5,839,397 times
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You are correct. Nobody gets 1/3 of the money back. People look at the total itemized deduction but they should look at the itemized minus the standard deduction then multiply by tax rate to see actual savings.
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Old 03-08-2009, 09:04 AM
 
Location: Forests of Maine
29,723 posts, read 47,495,927 times
Reputation: 17577
Quote:
Originally Posted by Mike in TN View Post
The only way in which mortgage interest can be deducted on federal taxes is by itemizing deductions, right?

If I itemize deductions I'll probably only end up with about $5,000, at most, so it's more beneficial for me to take the standard deduction of $11,400. I only pay about $2,200 in mortgage interest annually.
With $2,200 of annual interest I assume that your mortgage payments are around $185 / month. That is very low.

I have had mortgage payments that were $1,500 / month [ie $17,500 interest per year], and I have friends whose mortgage payments are around $4,000 / month [ie $47,000 interest per year]

You sir, have an amazingly low mortgage payment.



Quote:
... I'm thinking about this b/c everyone talks about deducting the interest they pay on their home, or essentially, getting upwards of 1/3 of that money back when filing a federal return.

My original thought process was that I might get $400 or so of the $2,000 mortgage interest I paid in back when filing my federal return. Looks like that won't apply to me since I should be taking the standard deduction (if I'm correct).

Note: this for 2009 return, not the 2008 return, which I've already filed.

Thanks for any help
yes
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Old 03-08-2009, 09:09 AM
 
Location: Forests of Maine
29,723 posts, read 47,495,927 times
Reputation: 17577
Quote:
Originally Posted by suzie02 View Post
You are correct. Nobody gets 1/3 of the money back. People look at the total itemized deduction but they should look at the itemized minus the standard deduction then multiply by tax rate to see actual savings.
Some people who itemize do so and manage to get all of their with-held taxes back.

So when all said and done, they will have paid zero income taxes. Because they have no tax liability.

It hinges largely upon having a lot of deductions.

Over 28% of American households pay no income taxes.

I did not pay income taxes from 1983 until 2007, I itemized and I have had no tax obligation. Nothing was with-held form my checks and I paid nothing afterwards. An accounting error, messed us up for 2008, we have just had to pay $91 in income taxes. But we are looking into correcting the issue before 2009 tax season.
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Old 03-08-2009, 10:02 AM
 
Location: Blackwater Park
1,715 posts, read 6,286,489 times
Reputation: 561
Quote:
Originally Posted by forest beekeeper View Post
With $2,200 of annual interest I assume that your mortgage payments are around $185 / month. That is very low.
Close, they are $292/mo. The remaining principle is about $53.5K at 4.75%.

Quote:
Originally Posted by forest beekeeper View Post
With $2,200 of annual interest I assume that your mortgage payments are around $185 / month. That is very low.
Close, they are $292/mo. The remaining principle is about $53.5K at 4.75%.

Quote:
Originally Posted by forest beekeeper View Post
I did not pay income taxes from 1983 until 2007, I itemized and I have had no tax obligation.
I'm not looking for deeply personal info, but would you mind sharing what some of your itemized deductions were that allowed you to have zero tax liability?
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Old 03-08-2009, 12:54 PM
 
Location: Forests of Maine
29,723 posts, read 47,495,927 times
Reputation: 17577
Quote:
Originally Posted by Mike in TN View Post
... I'm not looking for deeply personal info, but would you mind sharing what some of your itemized deductions were that allowed you to have zero tax liability?
Line 12: Business income or (loss), Schedule C.
We usually have a Schedule C loss.

Line 17: Rental real estate or (loss), Schedule E.
We usually have a Schedule E loss.

Line 18: Farm income or (loss), Schedule F.
We usually have a Schedule F loss.

Line 26: Moving expenses, Form 3903.
During my AD career, we moved to a new home on average every 3 years. So we filed this often.

Using these we normally have been able to keep our AGI low. Some years a negative number even.



On Schedule A;
Line 1: Medical and dental expenses.
Even though my employer provided Medical coverage [with the best 6-week trained personnel available], we have always had medical expenses. Now on pension my medical expenses are even higher.

Line 6: Real estate taxes.
We have [and do] own real estate, so yes we pay property taxes.

Line 7: Personal property taxes.
Every state that we have lived in, has had taxes on our vehicles.

Line 10: Home mortgage interest.
We never use this one. Our mortgages have all been for Apartment buildings that we collect. However most homeowners can try to use this.

Line 15: Gifts by cash or check to Charity.
We always use this write-off.

Line 19: Casualty or theft loss.
Rarely, but a few times we have used this.

Line 20: Unreimbursed employee expenses—job travel, union
dues, job education, etc, Form 2106.
We usually have uniform, commuting, and convention expenses.
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