For 2024, that standard deduction is $14,600 for single people and $29,200 for married couples filing jointly. The deduction is limited to $750,000 for homes purchased after Dec. 16, 2017, and interest rates were at rock bottom in 2020, 2021 and early 2022, making it often impossible for borrowers to itemize and deduct mortgage interest.
Mortgage interest deduction is “more meaningful” than last year
Mortgage rates plummeted with the onset of the pandemic, with the average U.S. rate on a 30-year fixed mortgage plummeting to 2.67% at the end of 2020 before starting to rise sharply in the first few months of 2022.
When interest rates were at barely noticeable lows, the mortgage interest deduction, in addition to other items, did not amount to the same level as the standard deduction. But now that interest rates are rising, it may be in a homeowner's interest to go beyond the standard deduction and itemize their tax return to deduct mortgage interest paid.
Kevin Leibowitz (pictured above), CEO and founder of Grayton Mortgage, said the ability for borrowers to deduct mortgage interest is the most meaningful thing they've seen in years and could be a “ray of hope” now that historically low interest rates are no longer in place.
Tracie Mayo, Owner of Savvy Mortgage Lending, with support from AIME, shares insights on navigating the volatile mortgage market. ๐ Gain valuable tips to achieve stability and growth in a changing economic environment. https://t.co/sVlgZde6Ka
โ Mortgage Professional America Magazine (@MPAMagazineUS) July 8, 2024
The benefits of taking that option are clear: “Homeownership reduces your tax burden and is one way to offset the hit of rising interest rates,” he told Mortgage Professional America. “You get this deduction, and once you exceed the standard deduction, you get access to a variety of deductions on Schedule A that weren't available to you with the standard deduction.”