Mortgage interest Deduction?

Question

How does it work? Do you get money back? If not how am i benefiting from it if i don't see any money from the taxes i paid get back to me? thanks

Answer 1

Mortgage interest, along with property taxes, excessive medical bills, and charitable donations, can be combined as a deduction from your gross taxable income when you file your taxes.  Whether or not you get money back depends on how much you had withheld (paid in) in the first place.

Answer 2

The mortgage interest deduction is the biggest red herring in the housing industry.  As Acermill said, (Mortgage interest, along with property taxes, excessive medical bills, and charitable donations, can be combined as a deduction from your gross taxable income when you file your taxes. Whether or not you get money back depends on how much you had withheld (paid in) in the first place) you can combine the mortgage interest you paid with a bunch of other expenses, including real estate taxes, etc.

Here is the big kicker.  It only helps if it is above the standard deduction amount.  The standard deduction in 2008 (for a married couple) will be $11,000.  So that means (if you are married) that all of these expenses would have to total more than $11,000 to even save you a single penny.  If your mortgage interest and taxes amount to $11,000 even, you won't save even a single cent on your taxes.  Then, on the amount over $11,000, you will probably save 25 cents for every dollar spent because it is a deduction against your taxable income.  So, for every dollar above the $11,000, you save a quarter.  (or worse yet, 15 cents).  Spending $12000 on mortgage interest (and taxes) to get $250 back is a crappy way to get $250.  

Yes, it's a deduction, but it's a crappy one.

good luck!