Is mortgage interest tax deductible? Yes, but there are caveats.
Is mortgage interest tax deductible? The short answer is “yes!” Homeowners who choose to itemize can deduct interest from their income taxes on as much as $750,000 in mortgage debt and up to the same amount of home equity loan debt on a primary residence or even a second home. However, that doesn’t mean everybody can or should take advantage of the mortgage tax deduction. Here are the biggest reasons why:
Somebody else made your payments
You’re not entitled to a mortgage deduction on any interest payments that weren’t paid directly by you.
The mortgage isn’t in your name
You cannot deduct mortgage interest if you are not legally obligated for it. The only exception to this rule is if you’re listed as a legal owner on the title deed.
The loan isn’t backed by the home
Unsecured mortgages do not qualify for interest tax deductions.
You don’t have enough deductions
If all of your tax deductions – including the mortgage interest deduction – end up being less than the standard tax deduction, then it makes no sense to claim the mortgage interest tax deduction.
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Readers: This is article 21 of 25 from my no-nonsense “Mortgage Basics” quick-reference series.
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