Mortgage interest may be tax deductible for some homeowners, but not every borrower benefits from the deduction. This page will help you understand when mortgage interest may qualify, why itemizing matters, and which home-related costs usually are not deductible. It is intended for general education only and should not be treated as individualized tax advice.
To claim mortgage-related deductions, the key filing concept to understand is the difference between taking the standard deduction and itemizing. Mortgage interest is generally claimed as an itemized deduction on Schedule A (Form 1040), line 8a, as “Home mortgage interest and points reported to you on Form 1098.” If you do not itemize, you generally would not claim the mortgage interest deduction.
Because of that, homeowners usually need to compare their total itemized deductions with the standard deduction and determine which approach is more beneficial for their situation. Itemized deductions are subject to certain dollar limitations and can include qualifying amounts paid during the tax year for mortgage interest, disaster losses, and certain other eligible expenses.
For mortgage-deduction purposes, the main question is not simply how much income you report, but whether your qualifying itemized deductions are enough to make itemizing worthwhile. If your itemized deductions do not exceed the standard deduction, the mortgage interest deduction may not provide a tax benefit. If they do, itemizing may allow you to claim eligible home mortgage interest and other qualifying deductions.
Home mortgage interest may be deductible when the debt is secured by a qualified home. In general, that means the loan is secured by your main home or second home. Whether the interest is actually deductible depends on the specific tax rules, including how the loan is used and whether you itemize your deductions.
This is why blanket statements about mortgage interest being fully deductible can be misleading. A borrower may have a mortgage, but still may not benefit from the deduction if they take the standard deduction instead of itemizing, if the debt does not meet the applicable requirements, or if the borrowed funds were not used in a way that qualifies under the rules.
For homeowners with larger mortgages, loan-size limits also matter. As of the beginning of 2018, couples who file their taxes jointly are only able to deduct interest on up to $750,000 of eligible mortgages. Married taxpayers who are filing separate tax returns have a cap of $375,000. The IRS states that you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness when it is home acquisition debt.
Borrowers with second homes or rental property should be especially careful not to assume the same treatment applies in every case. The rules can differ depending on how the property is used, how the debt is secured, and which tax rules apply to that property type. If you own more than one property, it is a good idea to review the details closely before claiming a deduction.
Before claiming a home-related deduction, gather the records that support it. That typically includes Form 1098, Mortgage Interest Statement, from your lender, along with relevant closing documents if you bought the home or paid deductible costs during the year.
If deductibility depends on how borrowed funds were used, keep records that clearly show that use. Publication 936 discusses the rules for deducting home mortgage interest, and homeowners should verify the details of any deduction with a qualified tax professional before filing.
Even if you qualify to deduct mortgage interest, some common homeownership costs usually are not deductible. Homeowners can’t deduct items such as insurance, including fire and comprehensive coverage and title insurance. Common examples include:
Homebuyers should also know that the only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes, and you deduct them in the year you buy your home when they otherwise qualify.
Beyond mortgage interest, one related homeownership deduction that may matter is property taxes. However, property taxes are not deducted the same way as mortgage interest, and the rules should be reviewed separately before claiming them.
Prior to using any deduction, it is incumbent on the tax-payer to review deduction guidelines in order to determine applicability.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Mortgage interest may still be deductible for some homeowners, but it is not automatic. The debt generally must be secured by a qualified home, the loan must meet the applicable rules, and you generally need to itemize deductions instead of taking the standard deduction.
Generally, no. Mortgage interest is usually claimed as an itemized deduction on Schedule A, so borrowers who take the standard deduction generally would not claim the mortgage interest deduction.
Home mortgage interest may be deductible when the debt is secured by a qualified home, such as a main home or second home. Whether the interest is actually deductible depends on the specific tax rules, including how the loan is used and whether you itemize your deductions.
Not necessarily. Mortgage interest is not automatically fully deductible for every borrower. A homeowner may not benefit from the deduction if they take the standard deduction, if the debt does not meet the applicable requirements, or if the borrowed funds were not used in a qualifying way.
For eligible home acquisition debt, the IRS states that interest may be deductible on the first $750,000 of indebtedness, or $375,000 if married filing separately. Whether you can actually benefit from the deduction still depends on your specific tax situation and whether you itemize.
It depends on whether your total itemized deductions are greater than your standard deduction. If they do not exceed the standard deduction, the mortgage interest deduction may not provide a tax benefit. If they do, itemizing may make the deduction worthwhile.
It may be possible, but borrowers should not assume the same treatment always applies. The rules can differ depending on how the property is used, how the debt is secured, and which tax rules apply to that property type.
No. Property taxes may be another important homeownership deduction, but they are not deducted the same way as mortgage interest. The rules should be reviewed separately before claiming them.
Usually not. Common homeownership costs that generally are not deductible include homeowners insurance, title insurance, additional principal payments made on a mortgage, and interest accrued on a reverse mortgage.
Homeowners should typically gather Form 1098, the Mortgage Interest Statement from the lender, along with relevant closing documents if the home was purchased or deductible costs were paid during the year. If deductibility depends on how borrowed funds were used, records should clearly show that use. Publication 936 and a qualified tax professional can help clarify the rules before filing.
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