Readers: This is article 21 of 25 from my no-nonsense “Mortgage Basics” quick-reference series.
Homeowners who choose to itemize can deduct interest from their income taxes on as much as $1 million in mortgage debt and up to $100,000 of home equity debt on a primary residence or even a second home. However, that doesn’t mean everybody can or should take advantage of the mortgage tax deduction. Heres why:
Somebody else made your payments. You’re not entitled to a mortgage deduction on any interest payments that weren’t paid directly by you.
The mortgage isn’t in your name. You cannot deduct mortgage interest if you are not legally obligated for it. The only exception to this rule is if you’re listed as a legal owner on the title deed.
The loan isn’t backed by the home. Unsecured mortgages do not qualify for interest tax deductions.
You don’t have enough deductions. If all of your tax deductions — including the mortgage interest deduction — end up being less than the standard tax deduction, then it makes no sense to claim the mortgage interest tax deduction.
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