Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Mortgage Interest Deduction

What it is:

A mortgage interest deduction allows mortgage borrowers to reduce their income tax liability by listing the amount of mortgage interest paid as an itemized deduction.

How it works (Example):

Each year, a mortgage borrower pays a combination of interest and principal to the lender. The interest component is tax deductible, and a borrower may list the interest she paid on a mortgage during a given year as an itemized deduction on her tax return. For example, if a borrower paid $1,000 in mortgage interest in a given year, he or she may usually subtract that $1,000 from his total taxable income for that year.

Why it Matters:

The mortgage interest deduction is used as an public policy initiative to promote homeownership as a path to increased social stability.

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