 Income tax 2021-2022. Interest you paid, part two. Get ready to get refunds to the max. Dive it in to income tax 2021-2022. Most of this information can be found on the Schedule A Tax Year 2021 instructions on the IRS website at irs.gov, irs.gov tax formula, looking at the itemized deductions, keeping them distinct in our mind from the adjustments to income or the above the line deductions, deductions for adjusted gross income or the Schedule 1 deductions, also noting itemized deductions only being taken if they're greater than the standard deduction. Page one of the Form 1040 focused on Line 12A taking either the standard deduction or the itemized deductions. The itemized deductions, if taken, reported on Schedule A, itemized deductions listed out on the left-hand side by major category. The total of them, if greater than the standard deduction, flowing in to 12A line on the first page of the 1040. These are gonna be the different standard deductions that you wanna keep in mind to get an idea as to whether someone will be itemizing or simply taking the standard deduction. So mortgage interest, this is Line 8, we're focused on continuing on with the mortgage interest, remembering that the mortgage interest is one of those big items that could push people over to being able to itemize. So when we're thinking about itemized deductions, one of the big things we ask or want to know about, do you own a home? If so, we're looking for the mortgage interest because there's usually gonna be a loan out on it. And then we're also looking for the property taxes, two big items that could open up the possibility of possibly taking more itemized deductions, those items typically pushing people over the limit. To do so, limit when loans exceed the fair market value of the home, if the total amount of all mortgages is more than the fair market value of the home, you can see publication 936. This is an unusual situation, you wouldn't expect generally for the home value to be above the loan value, but you can imagine situations in the market where funny things can basically happen. So normally, you would think that the home value is gonna be greater than the loan value, and that case, things are usually gonna be fairly straightforward. The reason for that is that of course, the lender doesn't want to take out or lend out money for greater than the home value, which is used as collateral or security in the event that the borrower defaults on the loan. So to do that, they're typically gonna require that 20% down or something like that so that they have that cushion in the event that a market decline happens or something like that. And the lender is now invested because they put the 20% down, so they're more kinda locked into it. And if they were to default, then the bank could foreclose on the home, which if they don't want the home, they want their money, right? So they wanna be able to sell the home for greater than the loan amount. That's the point of having the collateral. But you can imagine weird market conditions and fairly recently in the prior crash or so on the housing problems, we'd have weird incentives in the market which led lenders to make funny loans that are a lot closer to the value of the home and funny thoughts happen as times go good for a long period of time, like housing never goes down and everything goes down at some point. And so funny things happen when that mentality gets into the market and then there's a crash and then you can have funny situations like the loan being higher than the value of the home. So home mortgage interest limit, if your home mortgage interest deduction is limited, see publication 936. So again, it's usually straightforward and you can just basically take the documentation and plug that into the home mortgage interest. And these weird situations where there's a limitation, then the questions, well, how do I calculate how much is going to be deductible? Go to publication 936 to figure the amount of mortgage interest and points reported to you on form 1098 that are deductible. Only enter online 8A, the deductible mortgage interest and points that were reported to you on form 1098, refund of overpaid interest. If your form 1098 shows any refund or overpaid interest, don't reduce your deduction by the refund. Instead, see the instructions for schedule one, form 1040 line 8Z, more than one borrower. So we're not talking about more than one lender here, we're talking about more than one borrower. So if you and at least one other person other than your spouse, if you file a joint return, we're liable for and paid interest on a mortgage that was your home, you can only deduct your share of the interest. So you can imagine kind of funny situations where there's different borrowers and you're trying to say, well, it's my home and I want to be able to deduct the interest, but someone else possibly has an investment in some way in the value of the home. And so they might have a loan that's taken out, say, in their name. So you would think that you would only be able to deduct the interest related to the interest of your home on your form 1040 and on your schedule A. Someone else that basically is saying it's your home, but they have basically a loan that's taken out in their name, then they can't generally deduct it, you would think, because it's not their home. So they can't really deduct it on the schedule A and you can't really deduct it in that case generally because it's not your loan, it's not in your name, it's the other person's loan. So you've got that kind of disconnect and you want to keep in mind if you got kind of a funny financing structure in terms of purchasing the home, the loan deduction or the deduction of the interest can be important. And then the name in terms of who's name the loan is in, who's actually got the loan could be important as to who gets the deduction. And the other requirement to get the deduction is that it's your home if you're trying to deduct it on, say, a schedule A. Shared interest reported on your form 1098. If the shared interest was reported on the form 1098 you received, deduct only your share of the interest online 8A, let each of the other borrowers know what his or her share is. So if it's only one amount that was reported but you got multiple people basically involved in it, then they're saying you should allocate it out. Shared interest reported on someone else's form 1098. If the shared interest was reported on the other person's form 1098, report your share of the interest online 8B as explained in line 8B later. So note if it's on someone else's form 1098 that gets a little confusing because remember that this form is also going to the IRS. So it's more likely the IRS might say, hmm, if you have interest that you're reporting on the schedule A that they didn't get the form 1098 for then that gets a little bit more confusing. You would like to be able to structure this in such a way that the form in general so that everything goes as smooth as possible that the form 1098 that you're being receiving is the amount that you can kind of deduct on the schedule A if that would be the way you would imagine or like it to be. But obviously you can imagine funny situations happening over time with regards to the mortgage and the housing and all that kind of stuff. So form 1098 doesn't show all interest paid. So what if the form 1098 doesn't show all the interest that is on there. If you paid more interest to the recipient then is shown on form 1098, include the larger deductible amount online 8A and explain the difference. If you are filing a paper return, explain the difference by attaching a statement to your paper return and printing, quote, see attachment, end quote to the right line. So notice in that case, that would be again a more unusual situation. You're hoping that the form 1098 will appropriately tell you the amount of the deduction because that's what the IRS has. If it's something different, then you might have to explain it to the IRS or they're likely to basically question you about it. So mortgage interest line 8B, if you paid whole mortgage interest to a recipient who didn't provide you a form 1098, report your deductible mortgage interest online 8B. So you can, it's possible then not, most of the time you're dealing with a financial institution and the mortgage interest would then be reported to you. But if you didn't get the form 1098, then you might have to report it on 8B. That's not the thing that you would like to have happened, however, because again, the IRS is likely to be more suspect or suspicious of interest that you didn't get a 1098 for, which they've received on their end, that would be the way things would be going as smooth as possible. So if it could be set up in that way, that would generally be the preferred thing to do. So your deductible mortgage interest may be less than what you paid if one or more of the limits on the whole mortgage interest applied to you for more information about these limits, see limits on home mortgage interest earlier. Sell or finance mortgage, if you paid home mortgage interest to a person from who you bought the home and that person didn't provide you a form 1098. So this would be a more kind of an alternative purchasing structure that you could set up which means you might not be going, the mortgage might not be going through the same kind of line that you would have it before and under a normal kind of purchasing process, but it might be a way that you could structure the purchase and that might be why you don't get a form 1098 or something like that. Then you would write the person's name, identify number and address on the dotted line next to line 8B. So you're basically saying, this is the person that's gonna be involved and you're telling the IRS that that's where to go to get more information about it. So if the recipient of your home mortgage payments is an individual, the identifying number is his or her social security number. So if you didn't basically go through a financial institution but it's basically an individual that you pay the interest to, then you might not get the form. They might not give you the form 1098 and then you might have to refer to them specifically given the name of them into the IRS, which is of course the number, the SSN social security number. Otherwise it is the employer identification number or the EIN if they're a business. You must also let the recipient know your social security number. Mortgage, home mortgage interest line 8B, interest reported on someone else's form 1098. So now for whatever reason, someone else got the form 1098, but you think you should be able to report it on your schedule A for the mortgage interest. Another kind of unusual situation but you can imagine it coming up. So if you and at least one other person other than your spouse, if filing jointly reliable for and paid interest on the mortgage and the home mortgage interest paid was reported on the other person's form 1098, identify the name and address of the person or persons who received a form 1098 reporting the interest you paid. Again, it would not be ideal to have that kind of situation. You can see why that situation could come up but that's gonna confuse the IRS would be nice if the 1098 was going to you so that the IRS has the same documentation. If you are filing a paper return, identify the person by attaching a statement to your paper return and printing C attached to the right of the line. And one of the reasons the IRS is gonna do this of course is that they don't want the other person also claiming the same interest deduction on their side of things as well. So you didn't want people double dipping to people claiming the mortgage interest for the same loan.