{"id":879,"date":"2017-11-30T05:42:51","date_gmt":"2017-11-30T05:42:51","guid":{"rendered":"http:\/\/www.irstaxapp.com\/?p=879"},"modified":"2017-12-01T02:08:43","modified_gmt":"2017-12-01T02:08:43","slug":"mortgage-interest-deduction-8-faqs","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/","title":{"rendered":"Mortgage Interest Deduction : 7 FAQs"},"content":{"rendered":"<div>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/mortgage-interest-deduction\/\" rel=\"attachment wp-att-925\"><picture><source srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-600x314.webp 600w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-300x157.webp 300w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-1024x536.webp 1024w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction.webp 1200w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" type=\"image\/webp\"><img src=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction.jpg\" height=\"628\" width=\"1200\" srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-600x314.jpg 600w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-300x157.jpg 300w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction-1024x536.jpg 1024w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/11\/mortgage-interest-deduction.jpg 1200w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" class=\"aligncenter size-full wp-image-925 sp-no-webp\" alt=\"mortgage interest deduction\" decoding=\"async\" loading=\"lazy\"  > <\/picture><\/a>The mortgage interest is one of the most commonly utilized tax breaks under Internal Revenue Code\u00a0 by\u00a0 an Individual. In fact , most individual who takes loan for buying home , has to deal with the concept of mortgaging the home against the loan .<a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/163\" target=\"_blank\" rel=\"noopener\">Section 163(h) of the US Code 26\u00a0<\/a> deals with interest deduction . This post is answering some of the frequently asked questions on home loan interest deduction while computing taxable income of the year to clear the air around how does mortgage interest deduction work.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_62 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662d9b640b363\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-662d9b640b363\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#1What_is_mortgage_interest_for_tax_purpose\" title=\"1.What is mortgage interest for tax purpose?\">1.What is mortgage interest for tax purpose?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#2_Is_the_home_must_be_only_a_house\" title=\"2. Is the home must be only a house ?\">2. Is the home must be only a house ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#3_Who_can_claim_tax_deduction_for_interest\" title=\"3. Who can claim tax deduction for interest ?\">3. Who can claim tax deduction for interest ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#4_What_is_the_maximum_mortgage_interest_deduction\" title=\"4. What is the maximum mortgage interest deduction?\">4. What is the maximum mortgage interest deduction?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#_5_Can_I_deduct_Interest_on_refinanced_mortgage\" title=\"\u00a05. Can I deduct Interest on refinanced mortgage?\">\u00a05. Can I deduct Interest on refinanced mortgage?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/#_6_Do_I_need_to_maintain_records\" title=\"\u00a06. Do I need to maintain records ?\">\u00a06. Do I need to maintain records ?<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"1What_is_mortgage_interest_for_tax_purpose\"><\/span>1.What is mortgage interest for tax purpose?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<\/div>\n<div>\n<p>Mortgage interest is nothing but the interest you pay or accrue against you\u00a0 on a loan secured by a main home or second home.\u00a0 If the loan is not secured against the home , such loan is considered personal loan and shall not be counted for tax deduction part. Some of the type of loan that is considered as mortgage loan are :<\/p>\n<ul type=\"disc\">\n<li>A mortgage to buy your home<\/li>\n<li>A home equity loan<\/li>\n<li>A second mortgage<\/li>\n<li>A line of credit<\/li>\n<\/ul>\n<p>You can deduct interest on mortgage by securing on first or second home\u00a0 only .\u00a0You can&#8217;t deduct interest on a mortgage for a third home, a fourth home, etc. As far as the <strong>second home<\/strong> is concerned, you can deduct interest on mortgage of second home only if\u00a0\u00a0the requirements of\u00a0<a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/280A\" target=\"_blank\" rel=\"noopener\">IRC \u00a7280A(d)(1)<\/a>\u00a0that which is used for personal purposes for<\/p>\n<ul>\n<li>at least 14 days per year or<\/li>\n<li>10% of the number of days it is rented during the course of a year.<\/li>\n<\/ul>\n<p>Allowable mortgage\u00a0 interest is one that relates to either<\/p>\n<p>(1) loans taken for purchase an existing property, or improving an existing house or\u00a0 for new construction or<\/p>\n<p>(2) loan for any other purpose\u00a0 like\u00a0 buying furniture or other assets for house . But the loan must be secured by the residence.\u00a0 Please refer IRC \u00a7163(h)(3)(A), (B) and (C).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"2_Is_the_home_must_be_only_a_house\"><\/span>2. Is the home must be only a house ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Not necessarily. Well\u00a0 , generally the home means a house , but for the purpose of interest deduction under section 163 of US Code 26 , the meaning of home includes house, condominium, cooperative, mobile home, boat, recreational vehicle or similar property that has sleeping, cooking and toilet facilities.<\/p>\n<\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"3_Who_can_claim_tax_deduction_for_interest\"><\/span>3. Who can claim tax deduction for interest ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: justify;\">Only the individual who borrows the loan and obligated to pay the debt can claim deduction of mortgage interest . However if you our spouse\u00a0 jointly took loan , then both of you can claim the deduction for interest.\u00a0\u00a0Readers should also note the\u00a0\u00a0<a href=\"https:\/\/www.law.cornell.edu\/cfr\/text\/26\/1.163-1\" target=\"_blank\" rel=\"noopener\">Treas. Reg. Sec. 1.163-1(b)<\/a>, that mortgage interest that is paid by a taxpayer who is the (legal or equitable) owner of the property is deductible, even if that taxpayer is not directly liable on the bond or note that is secured by the mortgage.<\/p>\n<\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"4_What_is_the_maximum_mortgage_interest_deduction\"><\/span>4. What is the maximum mortgage interest deduction?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The aggregate mortgage interest that you can deduct is\u00a0 $1 million ($500,000 if you use married filing separately status). Apart from that you can also deduct interest on home equity debt of up to $100,000 ($50,000 if you&#8217;re married and file separately) .<\/p>\n<\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"_5_Can_I_deduct_Interest_on_refinanced_mortgage\"><\/span>\u00a05. Can I deduct Interest on refinanced mortgage?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The answer is a definite Yes .<\/p>\n<ul>\n<li>On refinancing the old mortgage , the balance of the new mortgage is also treated as acquisition debt up to the balance of the old mortgage.<\/li>\n<li>The unused balance of the the old mortgage balance not used to buy, build, or substantially improve your home might qualify as home equity debt.<\/li>\n<li>The home equity debt provision ( refer <a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/163\" target=\"_blank\" rel=\"noopener\">section 163(h)(3)c) of IRC<\/a>\u00a0provides that interest on up to $100,000 of that excess debt may\u00a0 also be deductible .<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"_6_Do_I_need_to_maintain_records\"><\/span>\u00a06. Do I need to maintain records ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The documents to authenticate your claim is required if your case selected for the IRS scrutiny .It is is better you keep following documents safely :<\/p>\n<ol type=\"disc\">\n<li><strong>Copies of Form 1098<\/strong>:\u00a0 that is given by\u00a0 the lender if you purchased your home in the current year, any deductible points you paid.<\/li>\n<li>Your closing statement from a refinancing that shows the points you paid, if any, to refinance the loan on your property.<\/li>\n<li>The identity details of the person from whom you bought house. So his\/her personal details like\u00a0 name, Social Security number and address should be maintained. IRS may require it for verification<\/li>\n<li>IRS will also verify if you&#8217;re deducting the eligible portion of your interest over the life of your mortgage in case of refinancing of the mortgage. So past return copies should be maintained. Although IRS has those returns, but is more for ready reference<\/li>\n<\/ol>\n<p>Refer\u00a0\u00a0<a style=\"font-size: 16px;\" title=\"Publication 936\" href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/p936.pdf\" target=\"_blank\" rel=\"noopener\">IRS Publication 936: Home Mortgage Interest Deduction<\/a><span style=\"font-size: 16px;\">.<\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The mortgage interest is one of the most commonly utilized tax breaks under Internal Revenue Code\u00a0 by\u00a0 an Individual. In fact , most individual who takes loan for buying home , has to deal with the concept of mortgaging the home against the loan .Section 163(h) of the US Code 26\u00a0 deals with interest deduction [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":925,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[9],"tags":[126],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/879"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=879"}],"version-history":[{"count":0,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/879\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/925"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=879"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=879"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=879"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}