Definition: The term "Mortgage Interest Tax Deduction" refers to a specific tax credit that can be claimed on your mortgage loan. This credit allows you to offset the amount of your mortgage interest paid by your lender, which in turn reduces your monthly mortgage payment. For example, if you owe $500 per month on a $300,000 mortgage and have an interest rate of 4%, there is a $1,000 credit available to you. This means that your total monthly mortgage payment would be reduced by $1,000. To claim the deduction, you need to file a tax return with the IRS (the Internal Revenue Service) and provide proof of your mortgage loan and how much interest you paid. The specific amount of the mortgage interest credit can vary depending on your individual circumstances, but it's typically around 2% to 3% of the outstanding balance. Mortgage interest tax deduction is a common way for people with higher debt levels or who are considering purchasing a new home to reduce their monthly mortgage payments by taking advantage of this tax credit.

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