First time homebuyer?

Question

Can someone explain what is the formula for deducting Mortgage Interest from my AGI. I'm trying to estimate if I'll have to pay taxes this year. I bought a home last year and I found the 2008 Federal Income Tax brackets so I know how much I'm supposed to pay this year... and I know how much I will make this year.

But I'd like to do some rough math to get a ball park figure on how much I can deduct for my mortgage interest. I don't think it's a straight line deduction. Meaning if I paid $50k in mortgage interest + property tax, I'm certain I cannot reduce my AGI by $50k.

thanks for your help! I will get a CPA to help me this year.

Answer 1

Go buy the 2007 Turbotax or Taxcut.  Plug in your 2008 estimates and see what prints out.  Fine tune with 1040ES and publication 505.  

Answer 2

There are many variables that need to be considered when figuring your taxable income.  Your mortgage interest and property tax are all deductible, but, obviously, you can't reduce your income below zero.    Points may also be deductible depending on the situation.  In order to be able to deduct all of the mortgage interest you paid you must exceed the standard deduction which is 5350 for single, 10700 for married and 7850 for head of household.  There are some new first time homebuyer credits out this year as well, but, be careful with them because they are actually loans against future tax returns.  You are wise to get some assistance.