Category: Finding Deductions
Interest You Paid - Overview
Home mortgage interest is interest that you pay on a loan secured by your main home or a second home. The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.
A home can be a house, condominium, cooperative, mobile home, boat, or similar property and must provide basic living accommodations that include: sleeping space, toilet and cooking facilities.
If you have paid mortgage interest for a second home, the amount you can deduct may be limited. A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also use it as a home during the year for more than the greater of 14 days or 10 percent of the number of days you rent it, for the interest to qualify as home mortgage interest.
If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on these mortgages:
- Mortgages you took out on or before October 13, 1987 (called grandfathered debt).
- Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2014 these mortgages plus any grandfathered debt totaled $1 million or less. (The limit is $500,000 if you are married filing separately.)
- Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2014 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).
If one or more of your mortgages does not fit into any of these categories, please visit the link below to refer to IRS Publication 936, Home Mortgage Interest Deduction, to figure the amount of interest you can deduct.
If you prepay interest, you must allocate the interest over the tax years to which it applies. You may deduct in each year only the interest that applies to that year.
You cannot deduct personal interest. Personal interest includes interest paid on a loan to purchase a car for personal use, credit card and installment interest incurred for personal expenses. Items you cannot deduct as interest include points (if you are a seller), service charges, credit investigation fees, and interest relating to tax–exempt income, such as interest to purchase or carry tax–exempt securities.
If you did pay any qualifying mortgage interest during the tax year, you can enter this in the TaxSlayer program under: Deductions> Itemized Deductions > Mortgage Interest and Expenses > Interest Reported on Form 1098.