Many won’t benefit from mortgage interest deduction

Q: How big a benefit is the deduction on mortgage interest?

A: The mortgage interest deduction may be the largest individual deduction available — it saved taxpayers $69.7 billion in 2013, according to the Joint Committee on Taxation — but that doesn’t mean you’ll benefit significantly from it, if at all.

Studies show you’re most likely to benefit from the deduction if your household income is more than $100,000 a year or if you live in an area with higher housing costs, such as the West or East coasts or a major city.

Taxpayers can claim the mortgage interest deduction only if they itemize. And it makes sense to only itemize if the sum of your individual deductions exceeds the standard deduction, which for the 2013 tax year is $12,400 for married couples filing jointly, $6,200 for singles and married individuals filing separately, and $9,100 for heads of household.

Q: What kind of homeowner is unlikely to benefit?

A: For anyone who purchased a less-expensive home, has an extremely low mortgage rate, is a number of years into a home loan and/or is filing jointly, interest payments will be less than or barely exceed the standard deduction.

Lots of homeowners fall into one or more of the above categories, which is why it should be no surprise a Pew Charitable Trusts study found less than half of all homeowners claim the mortgage interest tax deduction. The bottom line is buying property to get tax benefits is the wrong reason to buy property.