Monday, March 23, 2009

Calculate Non Taxable Mortgage Interest For California Residents

Taxable Mortgage Interest For California Residents

Many residents of California are concerned that they may not be able to write off their mortgage interest. This is simply not true. You can write off your mortgage interest on your taxes, but excessive mortgage amounts will send a red flag to the IRS.

The tax code allows Californians to calculate the allowable write off by adding the original price of their home, plus the dollar amount of any improvements (actual amounts spent on improvements) and $100,000. Once these three items are added up they cannot be more than the homeowner owes on the property.

Any amount over the calculated amount cannot be written off on your taxes.

Example:

$150,000 Original Price of Home
$ 30,000 New kitchen
$100,000
_________
$280,000

Current loan amount $250,000 - Amount is less than allowed so you are within your limits.

Current loan amount $350,000 - Amount is more than allowed so you are not able to deduct mortgage interest on the $70,000 over the calculated amount, plus the IRS may audit you.

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