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How much of my home mortgage interest is deductible?

Generally, interest on "acquisition debt" is deductible as long as the debt doesn't exceed for $1 million ($500,000 if you are married filing separately.) Acquisition debt is debt that is used to buy, build, or improve your home. Acquisition debt is a type of qualified home mortgage interest.

Interest on a mortgage secured by a second home is also deductible, but the total debt from first and second homes combined should not exceed the $ 1 million / $500,000 MFS limits.

These limits were considered sky high, and we almost never needed to worry about them. But now the real estate prices has risen so much, million-dollar mortgages are not rare anymore. So you do want to watch out for these limits.

Another type of qualified home mortgage interest is home-equity debt.

For more information, refer to IRS Publication 936, Home Mortgage Interest Deduction, and IRS Tax Topic 504, Home Mortgage Points.

Related topic:

  Are Points Paid for Home Mortgage Refinance Deductible?

Reference

  IRS Tax Topic 505, Interest Expense.

 

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. Individuals who wish to invest in retirement plans should contact their tax and financial advisors regarding their specific legal or tax situation.

 


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