Certified Specialist In Taxation Law
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Certified Specialist In Taxation Law |
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Another Teacher Benefit
Along with the new Teacher Retention Credit, teachers may be eligible for a mortgage interest credit on their 2000 federal tax returns. Under the Extra Credit Teacher Home Purchase Program, more than 4,000 teachers and principals who commit to serve in designated low-performing schools for five years may qualify for the credit allowed by IRC Sec. 25. Teachers in these counties may qualify:
The credit is a percentage (between 10 and 50 percent) of the mortgage interest paid. Teachers who qualify may take the credit for interest paid or accrued on the purchase, rehabilitation or improvement of their principal residence. Taxpayers claim the credit on federal Form 8396, Mortgage Interest Credit. Taxpayers must offset the mortgage interest deduction claimed on federal Schedule A by the amount of the credit. NonconformityCalifornia does not have a mortgage interest credit. So, a taxpayer who claims the mortgage interest credit on the federal return should increase the itemized deductions claimed on Schedule A by the amount of the federal credit. This is done as an adjustment on Schedule CA, California Adjustments.
Example of Mortgage Interest CreditTom is a teacher who purchased a new home and received a mortgage credit certificate from his bank. He paid $8,000 in mortgage interest. His credit was 20 percent, or $1,600 ($8,000 x 20 percent), for the 2000 tax year. His federal mortgage interest deduction is $6,400 ($8,000 - $1,600). For California purposes, he increases his itemized deductions on Schedule CA by $1,600.
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