Is there a % or other cap on the mortgage interest and property tax I can deduct from my federal taxes?

I've just moved to Los Angeles and am really stretching my budget to buy a brand new condo. (No cracks about buying at the top of the market! I've done a ton of research, and I think the place is well-priced. Plus, my partner and I expect to be making quite a bit more in the coming years.)





Anyway, the amount of mortgage interest and property tax I'll be paying over the course of a year is truly staggering: the annual total approaches $50K.





Can I really deduct all of this? I'm not going to reveal my income ... :^%26gt; ... but with both my jobs, let's just say it's in the low-six-figure range. Should I crank my payroll exemptions up to 15 or something, to get that money in each paycheck? I'm worried that some cap, or the alternative minimum tax, will kick in, and I'll end up with a huge tax bill. Does AMT take effect before or after mortgage interest is deducted?





(Extra points if anyone knows how the state of California will handle the deduction too.)





Thanks in advance for any help!Is there a % or other cap on the mortgage interest and property tax I can deduct from my federal taxes?
The federal and California limit on interest deductions is the same. It is equal to the interest on up to $1,000,000 of home mortgage acquisition indebtedness and $100,000 of secured home equity debt. See the link below. By way of example, if you had $2,000,000 of mortgage debt at an interest rate of 7%, you can deduct up to $77,000 which is 7% of $1,100,000. Your itemized deductions are phased out based on your adjusted gross income (see the instructions to Schedule A of Form 1040), so you lose some of your deductions there.





You do need to worry about the federal AMT. Generally, people who have high itemized deductions for state income tax and property tax will find themselves in federal AMT since these taxes cannot be deducted in computing AMT taxable income. A bit of good news for 2006 - the AMT exemption has risen to $42,500 for individuals and $62,550 on joint returns.





Eric,





Compute your regular tax first. Then you use Form 6251 http://www.irs.gov/pub/irs-pdf/f6251.pdf and compute your AMT. Essentially, you pay the higher of the two computations. With your high mortgage interest, your state income tax should be low-which is a plus because state and local taxes can't be deducted in computing AMT. The AMT does not phase out itemized deductions (a plus) but you can't deduct your property taxes (a negative). The AMT rate is lower than the highest regular tax rate (a plus). The only way to determine how it will affect you is to do the computation.Is there a % or other cap on the mortgage interest and property tax I can deduct from my federal taxes?
There's a cap, but I don't think it will apply to you.
Well i'm not sure exactly how much you can deduct but there is this great forum that answers like a million tax questions. http://moneycentral.msn.com/tax/home.asp and towards the bottom it says ask the tax expert he has to be the best tax guy out there. So try that! hope it helps!
There's a cap if you earn too much, but (judging by what you've said) you won't need to worry....My wife and I spend a lot on our interest %26amp; taxes ($23,000 combined last year) but we only make around $75K, so we actually paid NO federal income tax in 2005 (it was all refunded)