If you bought a house for the first time last year, you may be wondering what kind of deductions you can take related to your home purchase. One of the most common tax deductions for homeowners is a home mortgage interest deduction. If you qualify for this deduction, it can lower your tax liability for the year.
What Counts as Mortgage Interest?
The IRS defines mortgage interest as any interest you pay on a loan secured by your home, which may include your second home if you have one. This loan can be any of the following:
- A mortgage you used to buy your home
- A second mortgage
- A home equity loan
- A line of credit
The mortgage must be a secured debt on a qualified home in which you have ownership interest. If you meet this condition, you can deduct home mortgage interest by filing Form 1040 and itemizing your deductions on Schedule A.
Know Your Limits
While deducting home mortgage interest can reduce your tax liability, there are some limits to how much you can deduct. Typically, your deduction will be limited if all the mortgages used to buy, construct, or renovate your first home (and your second home if you have one) total more than one million dollars. If you are married and filing jointly, this limit is $500,000.
To learn more about your options for deducting home mortgage interest, contact the pros at Taxation Solutions, Inc. All the details can be tricky, so we’re here to provide you with the superior tax help you need.