Income Tax Deductions
Home Mortgage Interest FAQs
Also see our discussion of Home
Mortgage Interest Deduction
I have a mortgage for my primary residence and a second mortgage
for land that I intend to build a home on. Can the interest be
deducted for the second mortgage?
Unless you have begun construction of a home on the bare land
that you can occupy within 24 months, the land would be considered
an investment and the interest you paid on the second mortgage
would not qualify as deductible mortgage interest. However, it
would constitute investment interest if you itemize your deductions.
For more information, see IRS
Publication 550: Investment Income and Expenses (PDF 554kb)
and IRS
Publication 936: Home Mortgage Interest Deduction (PDF 139kb).
Is interest on a home equity line of credit deductible as a second
mortgage?
You may deduct home equity debt interest, as an itemized deduction,
if you are legally liable to pay the interest, pay the interest
in the tax year, secure the debt with your home, and do not exceed
certain limitations. For more information, see IRS
Publication 936: Home Mortgage Interest Deduction (PDF 139kb).
I refinanced my home last year and paid points. Are they all deductible
this year?
Generally points paid to refinance your home are not deductible
in their entirety in the year paid. They are "amortized" or
deducted over the life of the loan. For more information, see Income
Tax Deductions: Home Refinancing Points.
I took out a home equity loan to pay off personal debts. Is this
interest deductible? Where do I enter this amount on my tax return?
A loan taken out for reasons other than to buy, build, or substantially
improve your home, such as to pay off personal debts may qualify
as home equity debt. The interest would be deducted on line 10,
Form 1040, Schedule A, Itemized Deductions. The amount you
can deduct as interest on home equity debt is subject to certain
limitations. For more information, see IRS
Publication 936: Home Mortgage Interest Deduction (PDF 139kb).
Is the mortgage interest and property
tax on a second home deductible?
The mortgage interest on a second home which you use as a residence
for some portion of the taxable year, is generally deductible if
the interest satisfies the same requirements for deductibility
as interest on a primary residence. Real estate taxes paid on your
primary and second residence are, generally, deductible. Deductible
real estate taxes include any state, local, or foreign taxes on
real property levied for the general public welfare. Deductible
real estate taxes do not include taxes charged for local benefits
and improvements that increase the value of the property. For more
information, see the Real
Estate Tax section of IRS Publication 17. For
details on mortgage interest on a second home, see IRS
Publication 936: Home Mortgage Interest Deduction (PDF 139kb).
If I must deduct points over the life of my mortgage, and I have
a 30 year mortgage, does this mean that I divide the points paid
by 30 and enter that amount on Schedule A?
No, you don't divide the points by 30. If you choose to use the
straight-line method, you need to divide the points by the number
of payments over the term of the loan and deduct points for a year
according to the number of payments made in the year. If the loan
ends prematurely, due to payoff or refinance with a different lender,
for example, then the remaining points are deducted in that year.
Points not included in Form 1098, the Mortgage Interest Statement
reported to you by your financial institution (usually not included
on a refinance), should be entered on line 12 of Form 1040, Schedule
A, Itemized Deductions.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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