Mortgage Interest Deduction 101
One of the biggest benefits to homeownership is the mortgage interest deduction on your individual income tax return. Mortgage interest is defined as interest paid with respect to a mortgage on a qualified home for which the payer is the legal or equitable owner and the loan must be secured by the home.
There are two types of homes that are considered qualified homes. The first is your main home, or the home where you ordinarily live most of the time. The second type of qualified home is any second home you choose to treat as your second home. This can be a house, condominium, apartment, mobile home, boat, or motor home.
In most cases, you can deduct all of your home mortgage interest. However, the IRS has instituted some limitations. There are three categories for mortgage interest classification. If all of your mortgages between your main home and second home fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages.
The three categories are as follows.
Effective December 31, 2016, all mortgage interest statements must include:
These additional reporting requirements will allow the IRS to more easily identify taxpayers who deduct mortgage interest on loans that exceed the above limitations, and those that claim mortgage interest on more than just their primary and secondary residence.
While most homeowners fall into one of the categories above, there are certain situations that may affect the deductibility of mortgage interest. For questions regarding mortgage interest deductibility contact Fister, Williams & Oberlander, PLLC today.
Jennifer Gibson | 07/10/2017