The mortgage interest deduction (HMID) is one of the most popular tax deductions in the United States. As of 2017, due to the Tax Cuts and Jobs Act (TCJA), everything was changed. The law capped the debt on which interest could be deducted at $750,000, down from $1 million for new mortgages.
It almost quadrupled the standard deduction. When Congress did away with the personal exemption, making it unnecessary for some taxpayers to itemize. Previously, they can claim the personal exemption in addition to whatever itemized deductions they claimed.
A year after the TCJA went into effect, around 135.2 million taxpayers were anticipated to use the standard deduction. In contrast, it was known that 20.4% of taxpayers would itemize, with 16.46% of those filing to deduct mortgage interest.
Suppose that the sum of all your itemized deductions is less than the desired amount you are entitled to as a standard deduction. In that case, it may be wise to forego the mortgage interest deduction in favor of taking the standard deduction. The following are the percentages used in the deduction:
- In the tax year 2022, the standard deduction for single and married filers filing separately is $12,950.
- In the tax year 2022, the standard deduction for married couples filing together is $25,900; for widows (er)s, the standard deduction is $15,900.
- Twenty-two-year-old household heads will get $19,400 in 2022.
What you should focus on when claiming your tax deduction
- Those homeowners who itemize their taxes are qualified to deduct the interest they spend on a mortgage loan of up to $750,000.
- Tax Cuts and Jobs Act (TCJA) of 2017 lowered the cap on home loan principle for which interest may be deducted from $1 million to $750,000.
- The TCJA quadrupled basic deductions, so fewer people will need to itemize in 2018.
- As a result, the majority of homeowners now get no compensation.