Home Mortgage Interest Deduction

Since 1987, homeowners have been able to deduct mortgage interest from their taxable income. However, the deduction has been subject to limits. For example, only up to $750,000 of debt is deductible for homes purchased after 2017. And in order for the interest to qualify, it must be paid on a qualified home. This is defined as a house, condominium, co-op, mobile home, house trailer, or boat that has sleeping, cooking, and toilet facilities.

The mortgage interest deduction allows you to subtract the interest you pay on a home loan from your income when you file your tax return. The deduction is only available for loans to buy, build, or improve your primary residence. Mortgage interest is also deductible on a second home and a rental property you own. Mortgage interest is generally deductible in the year you paid it, but points (prepaid interest) are deducted ratably over the life of the loan. You can find the taxable mortgage interest amount and points on your Form 1098 Mortgage Credit Certificate. If you receive a Form 1098 for a multi-borrower loan and the amount of deductible interest is less than the amount you actually paid, report the full amount paid on Schedule A (Form 1040), line 8a.

The mortgage interest deduction applies only to debt secured by a qualified home, which is your main home or a second home you use for vacation, recreation, or other personal purposes. A qualified home also includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. There are limits on how much you can claim as mortgage interest, which were reduced under the Tax Cuts and Jobs Act, or TCJA.

How to Claim The Mortgage Interest Deduction?

The mortgage interest deduction allows homeowners to subtract a portion of their mortgage interest from their taxable income, reducing the amount of tax they owe. However, this deduction is limited and only applies to debt used to purchase, build or improve a primary home or second home. This deduction is also only available to taxpayers who choose to itemize their deductions instead of claiming the standard deduction.

You must have paid mortgage interest and meet certain requirements to claim this deduction. The debt must be secured by a qualified home, which includes a house, condominium, co-op, mobile home, house trailer, boat, or other similar property that has sleeping, cooking, and toilet facilities. The mortgage must be a valid debt on a qualified home, and you must have paid tax-deductible interest in the year it was paid.

Mortgage interest is only one of many itemized deductions that can save you money on your taxes. Other possible itemized deductions include charitable donations, property taxes, state income or sales tax, homeowner’s insurance, and other expenses related to owning a home. The amount of tax savings from itemizing will vary based on your filing status, how much you pay in mortgage interest, and the other items you qualify to deduct.