I was wondering how much of a yearly tax payment could be deducted using the homeowners tax deduction. I know that the policy allows for a deduction of the interest payments amount for up to $750,000. So if the interest payment amount is higher than your income tax amount, is it possible to pay $0 income tax? What would actually happen?
To put some numbers to this:
Lets say a person earns $80,000 a year and their tax rate every year (lets say just income tax for this question) is around $20,000 a year. If the interest payments on the house are $20,000 a year, what would happen if this person opted to use the homeowner's deduction? Do they pay 0% income tax since $20,000 - $20,000 = 0?
This doesn't seem right. What would actually happen?