mptfan wrote:This issue keeps coming up, so I thought I would bump this thread.
paulob wrote:mptfan wrote:paulob wrote:My itemized deductions for taxes is > than the standard deduction.
So, my interest is 100% deductible.
Your interest is only 100% deductible if your itemized deductions, excluding mortgage interest, is greater than the standard deduction.
That is what I said. The taxes I itemize, e.g. real estate, income, etc. are by themselves above the standard deduction. So, again, my interest is 100% deductible.
markcoop wrote:I don't know if I'm lucky or not. I live in NY and between my property taxes and state income taxes, I'm already over the standard deduction. Therefore, 100% of my mortgage interest is deductible.
markcoop wrote:I don't know if I'm lucky or not. I live in NY and between my property taxes and state income taxes, I'm already over the standard deduction. Therefore, 100% of my mortgage interest is deductible.
FinancialDave wrote:And let's just remember this lesson is not about mortgage interest, it is about the fact that the benefit you think you get from ANY itemized deduction is very non-linear.
To update the numbers for 2012:
Standard deduction $5,950 single, $11,900 married.
Some of the previous posts would indicate that say in 2012 I had $11,900 of charitable deductions and $11,900 of mortgage interest. Neglecting other misc deductions, I could figure my mortgage interest is totally deductible and calculate my benefit appropriately --- of course that would make my charitable deduction useless in my benefit calculation.
Joe S. wrote:paulob wrote:mptfan wrote:paulob wrote:My itemized deductions for taxes is > than the standard deduction.
So, my interest is 100% deductible.
Your interest is only 100% deductible if your itemized deductions, excluding mortgage interest, is greater than the standard deduction.
That is what I said. The taxes I itemize, e.g. real estate, income, etc. are by themselves above the standard deduction. So, again, my interest is 100% deductible.
Your original post was unclear. When you said "my itemized deductions for taxes is > than the standard deduction," I originally interpreted it to mean "my itemized deductions for when I do federal taxes is > than the standard deduction."
happymob wrote:I suppose if we paid more in state taxes, or had significantly higher property taxes (looking at you New Jersey), all mortgage interest would be tax deductible. But for a large part of the country, this is a benefit to only those who already earn a lot of money and buy too much house.
FinancialDave wrote:markcoop wrote:I don't know if I'm lucky or not. I live in NY and between my property taxes and state income taxes, I'm already over the standard deduction. Therefore, 100% of my mortgage interest is deductible.
That may be true, but just remember that the first 100% of your itemized deductions that equal your standard deduction are NOT deductible under your logic.
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FinancialDave wrote:markcoop wrote:I don't know if I'm lucky or not. I live in NY and between my property taxes and state income taxes, I'm already over the standard deduction. Therefore, 100% of my mortgage interest is deductible.
That may be true, but just remember that the first 100% of your itemized deductions that equal your standard deduction are NOT deductible under your logic.
NorCalDad wrote:It's a fair point, especially for people who are deep into their mortgage payoff and live in low-tax states.
In a state like California, where we have high income taxes, the average Boglehead may approach the standard deduction level through the state income tax and property tax deductions. I know that's the case for us.
mptfan wrote:paulob wrote:My itemized deductions for taxes is > than the standard deduction.
So, my interest is 100% deductible.
Your interest is only 100% deductible if your itemized deductions, excluding mortgage interest, is greater than the standard deduction.
cherijoh wrote:mptfan wrote:paulob wrote:My itemized deductions for taxes is > than the standard deduction.
So, my interest is 100% deductible.
Your interest is only 100% deductible if your itemized deductions, excluding mortgage interest, is greater than the standard deduction.
I think you missed Paulob's point - he is saying that his itemized deduction for taxes ALONE exceeds the standard deduction - therefore his mortgage interest IS 100% deductible.
Tom_T wrote:cherijoh wrote:I think you missed Paulob's point - he is saying that his itemized deduction for taxes ALONE exceeds the standard deduction - therefore his mortgage interest IS 100% deductible.
Not really. It depends on how you look at it.
FinancialDave wrote:I think if you want to decide the worth of your deductions they need to be considered on a Pro-rated basis, otherwise when new tax laws come out you won't know the value of one deduction over the next.
tfb wrote:I'm late to the discussion. Actually ALL mortgage interest is tax deductible even if you use the standard deduction. Standard deduction gives you some extra deduction on top of your mortgage interest. The extra deduction amount is variable; it can go to zero if your deductions are already high. People without a mortgage also get a bonus deduction but it doesn't mean you are not getting the tax deduction for your mortgage interest. You get it all the time, plus an extra bonus deduction if you use the standard deduction.
Tom_T wrote:The fact that the standard deduction may be higher than the mortgage interest doesn't mean that the standard deduction includes the interest!
If you elect to itemize deductions even though they are less than your standard deduction, check here . .
tfb wrote:Tom_T wrote:The fact that the standard deduction may be higher than the mortgage interest doesn't mean that the standard deduction includes the interest!
Why not? Everybody is free to itemize. You choose to use standard deduction only when it gives you a bonus. If you choose to itemize, you get your deduction for the interest. You only give up your bonus.
Tom_T wrote:Well, let's put it another way. Let's say you are a renter. You normally take the standard deduction.
You decide to buy a house. You spend $x/year on mortgage interest. It's not enough to itemize, so you continue to take the standard deduction. The additional money you are now spending on interest doesn't give you a dime's worth of tax benefit. Are you going to tell me that you consider your interest, your new extra expense, to be deductible?
tfb wrote:"I'm late to the discussion. Actually ALL mortgage interest is tax deductible even if you use the standard deduction. Standard deduction gives you some extra deduction on top of your mortgage interest. The extra deduction amount is variable; it can go to zero if your deductions are already high. People without a mortgage also get a bonus deduction but it doesn't mean you are not getting the tax deduction for your mortgage interest. You get it all the time, plus an extra bonus deduction if you use the standard deduction."
555 wrote:LOL, this is pure sophistry:tfb wrote:"I'm late to the discussion. Actually ALL mortgage interest is tax deductible even if you use the standard deduction. Standard deduction gives you some extra deduction on top of your mortgage interest. The extra deduction amount is variable; it can go to zero if your deductions are already high. People without a mortgage also get a bonus deduction but it doesn't mean you are not getting the tax deduction for your mortgage interest. You get it all the time, plus an extra bonus deduction if you use the standard deduction."
555 wrote:LOL, this is pure sophistry:tfb wrote:"I'm late to the discussion. Actually ALL mortgage interest is tax deductible even if you use the standard deduction. Standard deduction gives you some extra deduction on top of your mortgage interest. The extra deduction amount is variable; it can go to zero if your deductions are already high. People without a mortgage also get a bonus deduction but it doesn't mean you are not getting the tax deduction for your mortgage interest. You get it all the time, plus an extra bonus deduction if you use the standard deduction."
sscritic wrote:In support of tfb:
Schedule A, line 30If you elect to itemize deductions even though they are less than your standard deduction, check here . .
If you couldn't choose to itemize when your itemized is less than your standard, why do they put the box right on the form?
I could tell you why, but perhaps you can read another running thread for a hint.
sscritic wrote:Since someone actually thought about the issue (thanks porcupine), I will tell you that the other thread is about whether you can itemize on your state return if you take the standard deduction on your federal return. Some people will save more on their state return by itemizing than they lose by not taking the standard deduction on their federal, thus the box is there for those states that require you to do on your state what you do on your federal.
Because of different levels of standard deduction (as well as different rules for what is deductible), fed to state, you can have situations where you give up the federal bonus so you can take the additional itemized deductions on your state return. (I guess I just repeated myself.)
Note that if you do itemize on either return, you can never tell which items are itemized that are above the standard deduction. The items that are itemized above the standard deduction are your bonus itemized items, if you will, but you never can identify them. (And now for the third time) some people give up the federal bonus to get the state bonus.
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