Mortgage Interest Tax Deduction: Definition, What Qualifies

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What is the mortgage interest deduction?
Is mortgage interest deductible?
Mortgage interest deduction limit
Mortgage interest tax deduction example
What qualifies for the mortgage interest deduction?
Interest on a mortgage for your main home
- The property can be a house, co-op, condo, mobile home, house trailer, houseboat or an apartment.
- The home has to be collateral for the loan.
- The home must have sleeping, cooking and toilet facilities to count.
- If you get a nontaxable housing allowance from the military or through the ministry, you can still deduct your home mortgage interest.
- A mortgage that you get in order to “buy out” your ex’s half of the house in a divorce counts.
Interest on a mortgage for your second home
- You don’t have to use the home during the year.
- The house has to be collateral for the loan.
- If you rent out the second home, you have to be there for the longer of at least 14 days or more than 10% of the number of days you rented it out.
Points you paid on your mortgage
- Points are a form of prepaid interest on your loan. You can deduct points little by little over the life of a mortgage, or you can deduct them all at once if you meet every requirement.
Late payment charges on a mortgage payment
- You can deduct a late payment charge if it wasn't for a specific service performed in connection with your mortgage loan.
Prepayment penalties
- You may face a penalty for paying off your mortgage early, but you may also be able to deduct the penalty as interest.
How to claim the mortgage interest deduction
1. Look in your mailbox for Form 1098
2. Keep good records
- You used part of the house as a home office (you may need to fill out a Schedule C and claim even more deductions).
- You were a co-op apartment owner.
- You rented out part of your home.
- The home was a timeshare.
- Part of the house was under construction during the year.
- You used part of the mortgage proceeds to pay down debt, invest in a business or do something unrelated to buying a house.
- Your home was destroyed during the year.
- You were divorced or separated and you or your ex has to pay the mortgage on a home you both own (the interest might actually be deemed alimony).
- You and someone who is not your spouse were liable for and paid mortgage interest on your house.
3. Itemize on your taxes
Additional resources
Article sources
- 1. Internal Revenue Service. Publication 936: Home Mortgage Interest Deduction. Accessed Jan 18, 2024.