Mortgage Interest Deduction

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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated September 30, 2020

What is a Mortgage Interest Deduction?

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 Does a Mortgage Interest Deduction Work?

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 Does a Mortgage Interest Deduction Matter?

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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