In: Accounting
ANSWER(1)
The interest payments made on a mortgage can be claimed as a tax deduction on the borrower’s federal income tax return on a form called Mortgage Interest Statement – Form 1098. The standard Form 1098 reports how much an individual or sole proprietor paid in mortgage interest during the tax year. The mortgage lender is required by the IRS to provide this form to borrowers if the property that secures the mortgage is considered real property. Real property is defined as land and anything that is built on, grown on, or attached to the land. The home for which the mortgage interest payments are made have to be qualified by IRS standards. A home is defined as a space that has basic living amenities including a cooking equipment, bathroom, and sleeping area. Examples of a home include a house, condominium, mobile home, yacht, co-operative, rancher, and boat.9 Also, qualified mortgages, according to the IRS, include first and second mortgages, home equity loans, and refinanced mortgages.
A taxpayer who deducts mortgage interest payments has to itemize his or deductions. The total amount of mortgage interest paid in a year can be deducted on Schedule A. Itemized deductions are only beneficial if the total value of the itemized expenses is greater than the standard deduction. A homeowner whose itemized deduction, including mortgage interest payments, equals $5,500 may be better off going for his standard deduction—$12,400 in 2020—instead, since the IRS only allows a taxpayer to opt for one method.
A mortgage owner is also able to deduct points paid on the purchase of a real property. Points are interest paid in advance before the due date of the payment or simply pre-paid interest made on a home loan to improve the rate on the mortgage offered by the lending institution.
However, points reported on Form 1098 does not necessarily mean that the borrower qualifies for the deduction.
So, for the year 2019,the deduction can be calculated as above and interest is deducted for 2019 ,not for futher years.