Taxes are bad. But a good thing about them -- from the perspective of a financial writer at least -- is how naturally tax data lends itself to analysis.
Take something as mundane as the mortgage interest deduction, which, as the name implies, allows taxpayers to deduct the amount of money paid every year in interest expense on their mortgage.
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In 2012, the latest year comprehensive data is available, just over 24% of income tax returns claimed a deduction for mortgage interest expense. That equates to 38.4 million returns out of a total of 144.9 million.
When compared to other types of itemized deductions, the mortgage interest deduction was the third most frequently claimed by taxpayers. The most popular was for state and local taxes, which was claimed on 45.2 million tax returns. The runner-up was the deduction for charitable contributions, claimed on 37.4 million returns. And rounding out the top three was the mortgage interest deduction, claimed on 34.8 million returns.
The reason so many Americans go through the hassle of itemizing their deductions is because they stand to save a lot of money from doing so. The average mortgage interest deduction equated to $9,547 two years ago. This handily exceeded the corresponding standard deduction amount of $5,950.
While the average mortgage interest deduction dwarfs the standard deduction, it is itself dwarfed by three other types of itemized deductions. Take the deduction for loss from casualty (e.g., hurricanes and earthquakes, among other things) or theft. In 2012, the average deduction for this came out to $30,982. The average deduction for gambling losses was second, at $19,164. At third is an average deduction of $10,680 for state and local taxes. And only then comes the mortgage interest deduction.
Who's taking these deductions? Generally speaking, it's the middle class. Approximately 60% of all mortgage interest deductions claimed in 2012 were by taxpayers earning between $60,000-$200,000 in adjusted gross income.
But while the middle class accounts for the largest number of mortgage interest deductions, the upper class claims a higher average deduction amount. For taxpayers earning more than $500,000 in adjusted gross income in 2012, the size of the average mortgage interest deduction ranged from $21,000 to nearly $27,000. Middle class taxpayers, meanwhile, deducted an average of roughly $10,000 worth of mortgage interest.
The point here is that a lot of taxpayers save a lot of money by claiming the mortgage interest deduction. Thus, even though itemizing one's deductions is admittedly more burdensome than claiming the standard deduction, it's well worth it for the estimated two-thirds of American homeowners with a mortgage.
The article The Mortgage Interest Deduction in 6 Charts originally appeared on Fool.com.
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