When you purchase a home and have a mortgage, the government gives you a benefit. The benefit is the ability to tax-deduct the interest. But you have to itemize your deductions in order to do that. This means you miss out on the standardized deduction, which for 2010 is $5,700 if you're single or married filing separately, $11,400 if you're married filing jointly or are a qualifying widow(er) with a dependent child, or $8,400 if you file as head of the household. Many times, the interest from a mortgage makes an itemized deduction higher than the standard deduction, but that isn't always the case.
Look for any additional deductions to add to your mortgage interest if it's less than the itemized amount. These could include work-related expenses not paid by your employer, such as automobile mileage that doesn't involve commuting back and forth to work, classes you took to do better on the job, state and local income tax or other deductible items. Anything you can find that increases your itemized amount might make you think twice about eliminating mortgage interest as a tax deduction.
Simply select to itemize if you can't find enough other items and your interest isn't more than the standard deduction. You don't have to file a schedule A if you don't find it the most beneficial for your situation.
Ask yourself if your reluctance is because you hate filling out the extra form for itemizing or because you simply don't get as good of a deal if you itemize. If the answer is the first, you should find ways to reduce your mortgage interest.
Pay a chunk of money toward your principal or make periodic principal payments if you want to reduce the interest below the standard deduction. The more the principal decreases, the less interest you pay. Itemizing is the smart thing to do when you pay more in interest, but it requires extra record-keeping and increases the potential for an audit. If you reduce the amount of interest you pay, you eliminate the need to itemize.
Refinance your mortgage if you can't pay it off faster. You'll not only save money out of pocket, the biggest bonus, but also reduce the amount of interest you pay annually, possibly to the point where the standard deduction is more than the mortgage interest. Take into consideration the cost of refinancing and the amount of savings you reap before you take this step. Sometimes, the amount you save in money and the hassle of itemizing isn't worth the amount you spend refinancing.
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