If you properly itemize deductibles on your tax returns, you could claim your mortgage interest as a tax deduction. In fact, you can likewise claim the mortgage interest of a motor, boat, or second house as part of your deductibles. You have to satisfy some rules to qualify, however.
To Claim Your Mortgage Interest as a Deductible, You Should…
First off, itemize your deductions make them as detailed as possible on your 1040 when filing for taxes. You must also be legally responsible for your mortgage — meaning that it must be in your name. If you satisfy all these rules, you can deduct the mortgage interest you’ve paid on as much as $1.1 million of your loan debt, provided that you took out your loan after October 13, 1987.
Mortgage providers in Salt Lake City and other parts of Utah noted that the total limit of $1.1 million also has its own rules. You can claim a deduction on mortgage interest paid so long as the $1 million of your loan debt was used to buy, construct, or renovate your house. Likewise, you can claim a deduction on mortgage interest paid on as much as $100,000 of your loan debt used for a different purpose than to buy, build, or renovate your house.
What This All Means
The above limits mean that in the event that you borrow $200,000 on your house to pay for your children’s college education, for example, only the interest on $100,000 will be considered deductible. This is because it wasn’t used in buying, building, or renovating your house. This also means that the interest you’ve paid on a mortgage to buy a boat or motor home is a tax deduction.
In addition, you can deduct the interest you’ve paid on both your primary house and second house only if both loan amounts are under the above limits. This includes if both houses are considered “homes” by the Internal Revenue Service (IRS).
This doesn’t mean, however, that you should simply go and take out a mortgage because you can claim deductibles. Rather, think of this tax break as an “additional” deductible you could obtain because of something that you can comfortably afford — and would buy — regardless if a tax break is involved or not.