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Reducing Taxable Income By Use Of A Mortgage Taxpayers are generally worried about the high taxes they are bound to be deducted by the government. When the taxpayer is bound to pay high taxes, they receive lower wages. It is therefore important to identify some legal ways of reducing the amount of payable tax with a view to increasing one’s net income. This has to be accompanied by a proof that their taxable income is low and hence the amount of tax that one should pay. By use of mortgage interest deduction, intermediate and high-income earners can reduce the number of taxable dollars and hence payable tax. The the reason most taxpayers have been paying large amounts of tax is that they have not been aware of this method to reduce taxes. A a large number of middle-income earners combined with a huge group of high-income earners have pending mortgages on their households. As earlier illustrated a tax payer should provide enough proof of the amount they paid as interest on mortgages where under the mortgage interest deductions the amount they paid as benefits would be subtracted from the total taxable income which would hence result to them paying lower tax rates. The the tax system is compensated for by the mortgage interest deductions. The taxpayers who pay higher interest towards mortgage are relieved a higher amount of payable tax. The amount of payable tax would reach double the amount they are supposed to pay had mortgage interest deduction system not been in effect. This method hence works to bridge the gap between the low-income earners and the high-income earners in the average tax rates. This the method may not guarantee hefty gains regarding tax average rates, but it also involves no losses. The the method serves to enable taxpayers to own their own homes by reducing the amount of taxes that they are bound to pay to the government.
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Many tax systems are progressive such that individuals who receive the highest wage are bound to pay high taxes compared to people receiving low wages. The taxpayer’s income should increase over their lifetime. Mortgage is bound to decrease over one’s lifetime. It shows that when the income is low, the mortgage interest is the highest. The mortgage interests deduction strikes a balance between the period when one’s income is low and when it is high and hence maintaining average tax rates.
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The tax rules are bound to change, but the mortgage interest deductions helps balance the tax system at present. The the system contains complex financial system though it may seem simple. It is advisable to integrate the mortgage interest deductions on one’s taxable income in order to lower payable tax.