How is the tax break provided on home interest payment? Is it at tax-file time or at tax-witholding time?
Home Mortgage
oscar asked:
I know that home mortgage interest payments are tax-deductible. What I dont know is when I take off the tax-deduction - is that something that can be done ONLY when I file my taxes at the end of the year?
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I know that home mortgage interest payments are tax-deductible. What I dont know is when I take off the tax-deduction - is that something that can be done ONLY when I file my taxes at the end of the year?
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February 19th, 2009 at 9:25 pm
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Yes it must be claimed as an Itemized deduction on the Schedule A when you file your return, If you do not Itemized you can not claim the Mortgage Interest
Publication 936…
February 21st, 2009 at 9:12 am
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Counting on getting a big tax break for home interest payments may be a disappointment to you. You must still be able to itemize your deductions and many people are finding out that the home mortgage deduction is not sufficient by itself, even when coupled with state income taxes and property taxes. If you are able to itemize you get the break when you file, but you can get the benefit all year long, by claiming an extra exemption or 2 on your W-4 and have less money withheld from each paycheck.
February 23rd, 2009 at 2:52 am
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You can adjust your withholding through your employer based on your ‘expected’ taxes for next year. The IRS only cares that they are paid your full tax bill when you file. If you paid $0 in taxes all year but gave them a check for the full amount on 4/15, they will be fine. There are not, to my knowledge, places in the ‘withholding’ worksheet that allow you to calculate mortgage interest deductions. But once you’ve been in the same home and job for a year or two you can estimate your tax over-payment and have your withholding adjusted accordingly.
Some people - like me - are not very disciplined savers. So I haven’t had my withholding amount reduced even though I get a refund check every year. In essence, I’m giving the federal government a free loan each year and I’m losing out on interest I could be earning if I had the money in a bank account. But when I file my taxes each spring I receive a refund check instead of owing money. For me, having to come up with that money at tax time would be far more difficult than loaning the government money all year. Hope that helps!
February 25th, 2009 at 12:15 am
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The answer is yes and no.
You get the deduction only when you file your taxes.
However, if the deduction is quite substantial, you can contact your employer in advance by giving him a revised W-4 or telling him to adjust your federal withholding
to an amount that will give you neither a refund or having to pay taxes when you file.
What you are doing is giving yourself the tax benefit of substantial mortgage interest
during the year (in better net payroll checks) than waiting until you file your taxes by the following April 15th.
Most employers will oblige your request. Some will ask you to sign a waiver of responsibility.