Deduct Your Mortgage Interest Off Your Taxes

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Deduct Your Mortgage Interest Off Your Taxes

Deduct Your Mortgage Interest Off Your Taxes

Every homeowner knows that your mortgage interest can be deducted from your taxes, making that a great deal in the first few years of your loan, when you are primarily paying interest.  Wait, not everyone knows this?  Well, let’s go through how you can deduct your mortgage interest from your taxes, then.

Mortgage interest paid on a “qualified home” is tax deductible under most circumstances, according to the IRS.  They define a “qualified home” as a main or second home, and it must be classified as a house, condominium, cooperative, mobile home, house trailer, boat, or other property where you can sleep, cook and has toilet facilities.

While a main home is, well, where you live most of the time, a second home is a home that you own and is not for sale or rent during the year.  You don’t have to use it at all if this is the case.  If you did rent it out, you also have to live in it part of the year.  The threshold is 14 days, or 10% of the time the home is rented out, whichever is longer.  If you don’t do this, it qualifies as a rental property and is taxed differently.

Mortgage interest that can be deducted from you taxes has to be from a secured property loan, not a loan from your folks.  These include mortgages, deeds of trust, or land contracts, or anything that is a loan that secures the property with a lien.  It’s any loan for a home, including your primary home, second home, second mortgage on your home, or a HELOC or home equity line of credit.

Remember these additional conditions, as well.  You have to file an IRS form 1040 with a Schedule A, and itemize your deductions.  If you can’t, then there’s no point in even reading this, because you gain no advantage from mortgage interest anyway and likely get a good refund every year.

October 13, 1987 is a very important date to remember.  If your mortgage is dated after that mortgage loan amounts are limited to $1 million total if you are married filing jointly, or half that if married filing separately for acquisition debt.  This is debt that is used to buy, improve or build onto your home.  Home Equity debt is limited to $100,000 with the same rules for filing separately.  These are loans that are used for anything else than buying, building or improving the property.  In this case, the liens cannot be more than the value of the property.

If your loan is from before October 13, 1987, then you are free to deduct any interest, as you are “grandfathered in”.

Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays to better serve you. We work hard to make it easy on you.  Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?

 

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