1. You must itemize your tax return. If you intend to take the standard deduction then you will not be able to deduct mortgage interest.
2. The deduction is limited to only interest on debts secured by the principal residence or second home. Interest on third and fourth home loans, etc. is not deductible.
3. You must be legally liable for the loan, meaning that you cannot deduct payments you made for someone else’s mortgage, unless you are legally liable to make them.
Qualified Home
According to the IRS, for you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Financial Records
When tax season begins, you should receive an IRS Form 1098 from each of your mortgage lenders. It will show the total amount of interest you paid during the tax year. Do not worry about attaching this form to your tax return, as your lender will send the IRS s copy of their own.
Limitations
Unfortunately, you cannot deduct interest on more than $1 million of home acquisition debt for your primary and secondary residences. The $1 million limit is for married taxpayers, and is lowered to $500 thousand for single taxpayers.
Home Construction Loans
You can also deduct interest paid on mortgages used to cover construction expenses. According to the IRS the funds must be used to acquire the land, and to construct the home.
Further Reading
To learn more about the home mortgage interest deduction, checkout IRS Publication 9363.
The Tax Lady Roni Deutch and her law firm Roni Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight IRS tax liens on your behalf.
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