Home Mortgage Interest is a tax-deductible expense that can help reduce your taxes owed and even make staying in your home for the long-term more affordable. Mortgage interest is reported on Form 1040 Schedule A along with other itemized deductions such as real estate property taxes, medical
expenses, and charitable contributions.
Taxpayers paying mortgage interest should fill out Schedule A to see if their itemized deductions exceed their standard deduction. If so, taxpayers will save more money on their taxes by itemizing. Taxpayers who itemize their deductions will need to file the Form 1040 long form. The following will help you apply for and determine your IRS Mortgage Interest Deduction.
Documents You Will Need
- Form 1098 Mortgage Interest Statement from your mortgage lenders.
- HUD-1 Settlement Statement from your escrow company if you bought or sold a home.
IRS Forms and Publications You Need
- IRS Publication 936 Home Mortgage Interest Deduction (PDF-16 pages);
- Schedule A (PDF-2 pages);
- Instructions for Schedule A (PDF-9 pages);
- Worksheet to calculate the limitation on mortgage interest (Page 9 of IRS Publication 936).
Qualifying for the Mortgage Interest Deduction
Mortgage interest includes interest you paid on loans to buy a home, home equity lines of credit, and construction loans. The amount you can deduct is limited, and you can only deduct interest paid on your main home and a second home. Interest paid on third or fourth homes, for example, is not deductible.
The mortgage loan must be secured by your home in order for the interest to be tax-deductible and it must also:
- Make your ownership in a qualified home security for payment of the debt;
- Provide, in case of default, that your home could satisfy the debt;
- Be recorded or otherwise be perfected under any state or local law that applies.
Read more about this in the next and upcoming issue of The Forever Home!
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