Paying high interest on a mortgage? Did you know its Deductable?

As it comes time to do your taxes, it seems as each year there are a multitude of new questions involving what is tax deductible and what isn't. There is accounting and tax software that attempts to make it easy for you, but how do you know you are really getting all the deductions you should without having an actual tax consultant prepare your taxes? One deduction you definitely don't want to miss is for the interest paid on a home loan. Yes, this is a deductible item, but only when you are actually itemizing each deduction. Many tax professionals will advise you on using the itemized deduction method, as this can usually net you a larger tax return. It is not always applicable in every situation, however, but if you want to deduct your mortgage interest, it must be done.

Preparing Your Tax Return

Whether you prepare your taxes yourself, or if you have a tax professional take care of it, you'll want to do an itemized list of deductions so that you can take advantage of the potential savings on a mortgage. Depending upon how high your interest rates are, you could deduct quite a significant amount, which will definitely aid you in getting a larger sum back, or at least offsetting what you may owe.

This is especially important if you have a mortgage with bad credit, because your interest rate is most likely higher due to your risk factor. There are also other factors to consider regarding saving on your mortgage through your tax return, and it would be wise to consult with a tax expert before filing your taxes to ensure that you have done everything correctly.

Do You Have a Mortgage With Bad Credit?

If you were able to obtain a home loan while suffering from a poor credit score, then you likely acquired a mortgage with higher interest rates and fees. If, over the course of a few years, you have managed to improve your credit score significantly, you might consider refinancing in an attempt to take advantage of possible lower interest rates and improve your savings on the mortgage. While certain actions, such as a foreclosure, bankruptcy or debt collection may remain on your credit report for several years, it is still possible to get to a higher score so long as you are consistent in paying your bills on time for a long period of time. You can use a credit monitoring service or similar to check your credit report in order to see if your score has improved, or to see if there is anything you can do to improve your score, such as removing actions that are incorrect or have been rectified, such as making a payment in full on a late bill.

Making regular mortgage payments on time, as well as paying all your other bills on time, will help to improve your credit. In addition, decreasing credit card debt also helps raise your credit score. When you have substantially more credit available than you do credit card debt, it makes a significant difference in your credit score. Even the difference of just a few points can make a big difference on your interest payments, so it pays to see what your potential savings might be if you refinance with a higher credit score.

When you check your credit report, you'll also be able to see how certain actions you've taken can affect your credit score, for better or for worse. Another one of the main benefits of using a credit monitoring service is that you will be made aware of any suspicious activity, typically related to identity theft. Many homeowners today take advantage of such a service due to the rising increase in credit card fraud and identity theft.

What Else Can I Deduct Relative to my Home Loan?

Your mortgage isn't the only important deduction you can make, if you have more than one mortgage, all of them are applicable. You can also deduct the interest paid on loans acquired to make improvements on your home. It should be noted that there are limits to how much you can deduct. A tax professional can advise you on the correct limits.

Joy Mali is an active blogger who is fond of writing articles on Bad Credit Loans and advising people to get mortgage even with bad credit. Follow her on Twitter to know more on how to recoup some of the money spent on mortgage interest this tax season.