Nowadays many persons do not have enough money to buy a house, and they have to apply for a mortgage. They can apply for a sum bigger than the house price, because they will have to decorate it, and furniture and appliances cost a lot. They can choose to decorate only the main rooms of the house, kitchen, bedroom and living room. Only the appliances for kitchen cost a lot, and the homeowners have to buy them with mortgage money. When speaking about bedroom and living room, people have in mind a specific type of furniture, which might be expensive. They also have to invest in a heating system and good insulation. The majority of them do not know that they can get a return from the state, for the mortgage interest, the only thing they have to do is to search for information about Tucson Arizona tax rate.
What is a home mortgage interest deduction?
The home mortgage interest deduction allows people to reduce the taxable income of their houses by the amount of interest they pay on their loan. It reduces the amount of tax they have to pay. They have the option of not paying the tax on interest when they borrow money to build, buy or decorate their houses. There are not many countries that allow home mortgage interest deduction, and some of them allow people to apply for a deduction only for a minor part of the mortgage they have.
Who can claim a mortgage interest deduction?
The persons who want to apply for this deduction have to meet two conditions. They have to file their taxes on a special form and they have to itemize their deductions. The second condition is that their mortgage has to be a secure debt on a qualified house, on which they have ownership. There are two ways of claiming a tax deduction: itemize or take a standard deduction. They have a secured debt when they sign a legal document that allows for the institution or person that lends them money to sell the property if they do not pay the loan.
Common mistakes when claiming the mortgage interest deduction
Often loans are taken for multiple borrowers, and the lender may list the mortgage interest statement only to one of them, so one of the borrowers may think that he is not eligible for applying for a mortgage interest deduction. He only has to make a copy of the form that shows how much interest he paid and he can apply for his own deduction. Other mistake is if two persons live in a house, the loan is made on the name of one of them, and the other pays the mortgage for a time. The person that paid the mortgage may want to apply for interest deduction, but he has not this right, because he has no ownership on the property. A different situation is if two partners pay the mortgage, and one of them wants to claim the total amount of the deduction. He is not allowed to do this because he has to claim the deduction only for the part of interest he paid.