How Much of the Mortgage Interest Is Tax Deductible?

tax deductable mortgage interest

Owning a home can be pretty expensive -- so it only makes sense that you’d want to look into every possible way to save. One of the best ways to save is to deduct your mortgage interest from your taxes. But just how much can you deduct? Let’s take a look.

Mortgage Interest Tax Deduction Limits

If you want to deduct your mortgage interest on your home, you can do so on a first or second mortgage, with some limits, including:

  • The house must be your first or second home (if you rent out a second home, it needs to be occupied by you, the owner, for at least 14 days, or more than 10% of the days you’ve rented it out, whichever is larger)

  • The home must meet all IRS qualifications for a home, with sleeping, eating, and bathroom spaces (this can actually include mobile homes, boats, and RVs, as long as they meet the above requirement)

  • Your deduction is limited to $1,000,000 in mortgage debt as an individual or married couple filing jointly

  • Your deduction is capped at $500,000 if you’re married and filing separately

If you’re deducting interest from a home equity loan or HELOC, you can only deduct $100,000 from that loan (50,000 if married and filing separately) or the amount of equity you currently have in your home, whichever is less

Can You Deduct Mortgage Interest On a Empty Lot? 

If you have unimproved land, can you also deduct your mortgage interest payments on that land from your taxes? That depends. If you only intend to use the land at some unknown future time, then you won’t be able to. But, if you intend to build a home on the land and will move into that home in the next 24 months, you can claim a deduction, with some conditions, which include:

  • Must also be your first or second home

  • Your entire mortgage must be $1.1 million or less

  • Must also meet IRS “home” qualifications

Do Mortgage Points Count for Tax Deductions?

In most cases, if you pay points on your mortgage as a form of prepaid interest, you can also deduct these from your taxes. Despite that, if you pay points as part of a refinance, you may have to wait a while to fully deduct them, as you will usually have to do this over the life of the entire loan, instead of all at once.

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