While popular and worthwhile, the perceived value of the home mortgage deduction may be greater than its actual value. Let’s break down the home mortgage deduction and see what it is and what it is it not.
Tax Credit vs Tax Deduction
You need to understand the difference between a tax DEDUCTION and a tax CREDIT. A deduction reduces the amount of your income tax that is subject to taxes, and a credit directly reduces your tax bill. Say you are in the 25% federal income tax bracket. For every $1000 in mortgage interest you pay (over the standard deduction), your tax bill will be reduced by $250. In contrast, a $1000 tax credit…
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