The IRS states that, “In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.” Below are the details on each of those criteria.
General Guidelines To Determine If Your Mortgage Interest Is Tax Deductible
- You must itemize deductions on Form 1040 when you file taxes.
- You must be legally liable for the debt.
- If your mortgage was taken out after October 13, 1987, the interest on up to $1.1 million of mortgage debt may be tax deductible. The $1.1 million is broken down into two parts as follows
- $1 million of mortgage debt used to buy, build or improve your home may be tax deductible.
- Interest on up to $100,000 of mortgage debt that was used for a purpose other than to buy, build or improve your home may be tax deductible.
- If your mortgage was taken out before October 13, 1987 no dollar limits apply.
Mortgage Interest On Your Motor Home or Boat May Be Tax Deductible
A home is defined by the IRS as “a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”This means the interest you pay on a loan to acquire a motor home or boat that meets the criteria above may be tax deductible.
Mortgage interest on both a main home and second home (which could be a boat or motor home) may be deducted if both mortgage amounts fall under the total dollar limits above, and as long as both homes meet the IRS definition of home. If either home is rented out, even for part of the year, restrictions that may limit your ability to deduct mortgage interest will apply.
For detailed rules see IRS Publication 936