Interest deduction

What is Interest Deduction?

Interest deduction is a type of tax relief that homeowners can take advantage of to reduce their taxable income. It is a method that allows homeowners to subtract the amount of interest they have paid on their mortgage from their taxable income. This can be particularly beneficial for homeowners who have taken out large mortgages, as it could potentially save them a significant amount of money on their tax bills.

How Does Interest Deduction Work?

Interest deduction works by allowing homeowners to deduct the amount of interest they have paid on their home mortgage from their taxable income. To qualify for this deduction, the homeowner must itemize their deductions on their tax return. This means that they must list out each of their eligible expenses and deductions separately, rather than taking the standard deduction. The amount that can be deducted will depend on the homeowner’s tax bracket and the amount of interest they have paid.

Who Can Take Advantage of Interest Deduction?

Interest deduction is available to any homeowner who has a mortgage on their primary residence or a second home. However, there are limitations to the amount that can be deducted. As of the 2018 tax year, homeowners can only deduct interest on up to $750,000 of qualified residence loans, or $375,000 for those who are married but filing separately.