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Deductions & credits
Sounds like you are confused about taking a distribution from an IRA for the down payment. If you are younger than 59 1/2 there is not an early withdrawal penalty for taking out up to $10,000 from a traditional IRA for a down payment on a first house.
If you are just taking out money to make your mortgage payments you will be taxed on the distribution at your tax rate. You will receive a 1099R that you will need to enter on your 2021 tax return
To enter your retirement income, Go to Federal> Wages and Income>Retirement Plans and Social Security>IRA 401 k) Pension Plan Withdrawals to enter your 1099R.
And as far as deducting the mortgage interest:
Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns. The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns.
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund. The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts) The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you. Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.
2021 STANDARD DEDUCTION AMOUNTS
SINGLE $12,550 (65 or older + $1700)
MARRIED FILING SEPARATELY $12,550 (65 or older + $1350)
MARRIED FILING JOINTLY $25,100 (65 or older + $1350 per spouse)
HEAD OF HOUSEHOLD $18,800 (65 or older +$1700)
Legally Blind + $1350