Why didn't my mortgage or property taxes increase my refund?

by TurboTax•439• Updated 9 months ago

You would assume that entering thousands of dollars' worth of mortgage interest and real estate (property) taxes would have some effect on your refund, but it's just sitting there, refusing to budge.

Or maybe it did move (a little), but not nearly as much as you had expected. What's going on?

Possibility 1: Right now, the standard deduction is saving you the most money.

You must itemize to benefit from mortgage interest and property tax deductions. If your standard deduction is more than your itemized deductions (which also includes state and local income tax or sales tax, charitable contributions, and medical expenses), we automatically give you the standard deduction so you can get the biggest refund.

This can certainly change if you're not yet finished with the Deductions & Credits section. Maybe you still haven't entered a large donation or a bunch of medical expenses. If the sum of those and other Schedule A deductions exceed your standard deduction, we'll automatically switch you over to the itemized deduction.

Possibility 2: You itemized in prior years, but not this year.

The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction amount for tax years 2018 through 2025.

In addition, the SALT deduction (state, local, property, and sales tax) is now capped at $10,000 ($5,000 for couples filing separately), whereas in prior tax years there was no cap.

As a result of these and other tax law changes, our estimate is that nearly 90% of tax filers will now be taking the higher standard deduction, up from around 70% last year. And if you're in the 90% group, you won't see a change in your refund after entering your mortgage interest and property taxes.

Possibility 3: You're itemizing, but...

... your refund hasn't increased as much as you thought it would. This could either be the new limit on the SALT deduction, of which property tax is a major component (see Possibility 2) or it could be a simple misunderstanding of how deductions work. A deduction isn't a dollar-for-dollar tax credit; rather, it reduces the amount of income you pay taxes on.

Lastly (this is uncommon) it could be that you're getting hit with the AMT this year, and that means you can't take a deduction for property (real estate) taxes, period.