Itemized Deductions, Standard Deductions: Real Estate
(Taxes, Mortgage Interest, Points, Other Property Expenses)
I have a mortgage for my primary residence and a second mortgage
for land that I intend to build a home on. Can the interest be deducted for
the second mortgage?
Unless you have begun construction of a home on the bare land that you
can occupy within 24 months, the land would be considered an investment and
the interest you paid on the second mortgage would not qualify as deductible
mortgage interest. However, it would constitute investment interest if you
itemize your deductions. For more information, refer to Publication 550, Investment
Income and Expenses, chapter 3 and Publication 936, Home Mortgage
Is interest on a home equity line of credit deductible as a second
You may deduct home equity debt interest, as an itemized deduction, if
you are legally liable to pay the interest, pay the interest in the tax year,
secure the debt with your home, and do not exceed certain limitations. For
more information, refer to Publication 936, Home Mortgage Interest
Deduction; and Tax Topic 505, Interest Expense.
I refinanced my home last year and paid points. Are they all deductible
Generally points paid to refinance your home are not deductible in their
entirety in the year paid. They are "amortized" or deducted over the life
of the loan. For more information, refer to Publication 936, Home
Mortgage Interest Deduction, and Tax Topic 504, Home Mortgage
I took out a home equity loan to pay off personal debts. Is this
interest deductible? Where do I enter this amount on my tax return?
A loan taken out for reasons other than to buy, build, or substantially
improve your home, such as to pay off personal debts may qualify as home equity
debt. The interest would be deducted on Form 1040, Schedule A (PDF), Itemized Deductions. The amount you can
deduct as interest on home equity debt is subject to certain limitations.
For more information, refer to Publication 936, Home Mortgage Interest
Deduction; and Tax Topic 505, Interest Expense.
Our home was seriously damaged by flooding last year. Are there
special provisions for claiming a loss since our home is located in a declared
Casualty losses not compensated for by insurance or otherwise are generally
deductible only in the year the casualty occurred. However, if you have a
deductible loss from a disaster in an area that is officially designated by
the President of the United States as eligible for federal disaster assistance,
you can choose to deduct that loss on your return for the year immediately
preceding the loss year. In other words, you may treat the loss as having
occurred in either the current year or the previous year, whichever provides
the best tax results for you. If you have already filed your return for the
preceding year, the loss may be claimed by filing an amended return, Form 1040X (PDF), Amended U.S. Individual Income Tax
Return. For more information on disaster area losses (including flood
losses), refer to Tax Topic 515, Disaster Area Losses (Including
Flood Losses), or Publication 547, Casualties, Disasters and
Thefts . Publication 584, Casualty, Disaster, and Theft Loss
Workbook, can be used to help you catalog your property.
Is the mortgage interest and property tax on a second residence
The mortgage interest on a second home which you use as a residence for
some portion of the taxable year, is generally deductible if the interest
satisfies the same requirements for deductibility as interest on a primary
residence. Real estate taxes paid on your primary and second residence are,
generally, deductible. Deductible real estate taxes include any state, local,
or foreign taxes on real property levied for the general public welfare. Deductible
real estate taxes do not include taxes charged for local benefits and improvements
that increase the value of the property. For more information, refer to Publication 17, Your Federal Income Tax for Individuals; chapter 24 Tax Topic 503, Deductible Taxes; and Publication 530, Tax Information
for First-Time Home Owners.
If I must deduct points over the life of my mortgage, and I have
a 30 year mortgage, does this mean that I divide the points paid by 30 and
enter that amount on Schedule A?
No, you don't divide the points by 30. If you choose to use the straight-line
method, you need to divide the points by the number of payments over the term
of the loan and deduct points for a year according to the number of payments
made in the year. If the loan ends prematurely, due to payoff or refinance
with a different lender, for example, then the remaining points are deducted
in that year. Points not included in Form 1098 (PDF) (usually
not included on a refinance) should be entered on Form 1040, Schedule A (PDF), Itemized Deductions. For more information,
refer to Publication 936, Home Mortgage Interest Deduction; and Tax Topic 504, Home Mortgage Points.
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