I'm assuming I can add these two together $44,000 + $3,500 and come up with $47,500 of income that I will need to pay taxes on. Is this correct?Yes.From this $47,500 amount can I reduce Mortgage Interest and Capital Losses?For example, If I paid $10,000 in mortgage interest and lost $10,000 in selling stocks (capital loss)...Would I now only have $27,500 worth of income that I will need to pay taxes on?Not quite. Your mortgage interest is deductible as an itemized deduction. If you have been using a standard deduction, then the mortgage will only reduce your taxable income by the amount that $10,000 exceeds your standard deduction. You can only deduct $3000 in capital losses in a year. The $7000 balance will be carried forward to next year.So, you are looking at paying taxes on at least $34,500 of additional income, perhaps substantially more.Ira
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