A mortgage exemption is a type of tax break or exemption that is extended to homeowners. Essentially, the homeowner can calculate the amount of the exemption using a formula provided by a tax agency, then claim that exemption when filing an annual tax return. The end result is that the amount of the exemption is deducted from the total amount of income reported on the return, aiding in reducing the total amount of taxes owed for the period. Qualifying for a mortgage exemption will depend on the criteria established by the tax agency, with those qualifications subject to change from one tax year to the next.
The process of determining the amount of a mortgage exemption normally involves identifying the criteria that must be met to receive one of several different types of exemptions relevant to the property type. For example, the net assessed value of the home will serve as the basis for calculating the taxes due. In order to obtain an exemption, the property may have to be considered the primary residence of the owner for a certain amount of time during the tax year. This would mean that while the owner may be able to claim a mortgage exemption on this primary residence, that same exemption would not be applicable to real estate that functions as rental property. Typically, other types of exemptions are associated with weekend homes of residential properties that are leased or rented by a landlord.
Since laws regarding mortgage exemption will vary from one jurisdiction to the next, this type of benefit may not be extended in all situations. For example, the owner of a mobile home that is currently located on a piece of mortgage property may be eligible for the exemption in some jurisdictions, but not in others. In addition, the exemption may be a set amount based on the net assessed value of the property, or some other method involving both the net assessed property value and the remaining balance on the mortgage may be employed.
In many locations around the world, homeowners must apply in advance in order to receive a mortgage exemption. Typically, there are deadlines for application that must be met in order to receive an exemption for the following calendar year. Failure to file for the exemption or provide the documentation necessary for processing can mean losing the exemption and not being allowed to claim the amount on a tax return. Typically, local agencies that aid in the assessment of property or a local tax agency can assist in understanding what information is required to process the application, as well as provide guidelines for submission.
