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I had a quick question about what can be written off on your personal income taxes in the USA, here in Canada in order to write off the property tax or mortgage interest, the home has to be an investment house / rental house.
I have heard from various sources that in the US you can write off ALL property tax and mortgage interest against your income at the end of the year, effectively reducing your taxable income, is this true?
Does the same apply to health insurance payments?
How long has this been in effect for, is it something the IRS may eventually disallow?
I had a quick question about what can be written off on your personal income taxes in the USA, here in Canada in order to write off the property tax or mortgage interest, the home has to be an investment house / rental house.
I have heard from various sources that in the US you can write off ALL property tax and mortgage interest against your income at the end of the year, effectively reducing your taxable income, is this true?
Yes. All mortgage interest on your primary home is deductible if you itemize your deductions.
Quote:
Does the same apply to health insurance payments?
No. You cannot deduct your health insurance payments
Quote:
How long has this been in effect for, is it something the IRS may eventually disallow?
The mortgage interest deduction has been in effect for countless years. The government would never try to repeal this. If anyone voted for this they would be out of a job because a great number of voters use this deduction!
That's generally true, although I am not a tax professional. There may be limits particularly if you have a second home (it's meant to award home ownership rather than investors).
Health insurance premiums if paid by the employer are deductable from your taxable income. Maybe if paid by yourself as well, not sure. Medical payments in general are tax deductable to a certain degree.
Mortgage interest tax deductability is the great American freebee. No way a politician is going to intruduce a bill to take that away and expect to stay in office. Actually, in the U.S., you have a choice of taking the standard deduction or the itemized deduction with your home interest included. Sometimes even with a house and interest payments you will save more money just taking the standard deduction. With low interest rates it's not the great benifit it was in the days of 12% mortgages.
Now, if you have another property, and rent it, you can depreciate the property each year and write off any improvements or repairs. You can also write off the taxes, water, gas and electric costs, any upkeep costs, the cost of going to and from the property to 'check on it', association dues, etc.
But if you sell the property and don't reinvest the money in another rental within 180 (I think) days you will be taxed a special 25% 'recapture of depreciation' tax on all sales proceeds.
Health insurance premiums if paid by the employer are deductable from your taxable income. Medical payments in general are tax deductable to a certain degree.
If your employer pays your health insurance premiums you cannot deduct the cost. How can you deduct something you don't pay?
To do this you would have to have your employer add the cost to your income, then subtract it from you income - a wash.
The only way health insurance costs are deductible is if they are more than 7% of your adjusted gross income. If they are more than 7% you have greater things to worry about than your income taxes
Now, if your employer has one, you can sign up for a FLEX Spending Account. The money comes out of your pay tax free and can be used for any medical expense. The drawback is that any money you don't use is forfeited.
[quote=HappyandMarried;280314]If your employer pays your health insurance premiums you cannot deduct the cost. How can you deduct something you don't pay?/QUOTE]
I meant if the employee deducts it from your paycheck as part of an employee program....but I wasn't sure. I defer to your knowledge, I was to lazy to look it up. Looks like you covered it.
Thanks so much for the replies, this is definitly helpful, you guys definitly have an advantage over Canada there, but your property taxes are through the roof, which i guess balances out.
Shawn
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