Are you taking advantage of perhaps the most popular tax deduction — interest on a home mortgage?
This week The Motley Fool released a video on what you need to know about deducting mortgage interest.
Watch the video, Deducting Mortgage Interest: What You Need to Know.
In the following video, Dan Caplinger, The Motley Fool’s director of investment planning, looks closely at the mortgage interest deduction. Dan notes that there are two categories of mortgage loans for IRS purposes: those used to buy or make substantial improvements to a home, and those used for maintenance or non-related expenses. The first category is eligible for deductions on principal amounts up to $1 million, while the second has lower limits of $100,000. That can be a problem when Wells Fargo (NYSE: WFC ) , Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , and other lenders offer lower rates for bigger loans that might exceed the deductible-interest amount. Dan concludes with the important point that only those who itemize get the benefit of the mortgage interest deduction, making the tax break worthless for those who take the standard deduction instead.