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Mortgage Interest
Deductions
Deduction
for Mortgage Interest, Points, Origination Fees
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Mortgage interest is deductible
up to $1 million, $500,000 if Married
Filing Separately as long as you use the
money to buy, build or improve on your
home and the loan is secured by your
home.You can deduct
- the interest on
your home loan
- the real estate
taxes on the home.
- Points or
origination fees paid when you
purchase your home are generally
deductible in the year you pay them.
- Points paid to
refinance a loan must be deducted
over the term of the loan.
- the interest you pay on loans
secured by your home and used for a
purpose other than to buy, build or
improve your home is deductible for
loans up to $100,000 ($50,000 if you're
Married Filing Separately).
You must be legally
liable for the loan. You cannot deduct
payments you make for someone else on a
loan your not liable for.
You must file Form 1040
and itemize deductions on Schedule A
(Form 1040).
Both you and the lender
must intend that the loan be repaid.
There must be a true
debtor-creditor relationship between you
and the lender.
The mortgage must be a
secured debt on a qualified home.
You should receive a Form
1098, Mortgage Interest Statement, from
your mortgage lender. This form reports
the total interest that you paid during
the tax year.
The amount you can deduct
may be less than the amount you paid,
based on limitations of the mortgage
interest deduction.
Personal Residence Capital Gain
Exclusion
When you sell your home, the IRS allows
you to exclude the gain on the sale from
taxable income, up to $250,000 if
single, and $500,000
if you're Married Filing Jointly and you
both meet the use requirement.
You can claim the exclusion if you own
and used the home as your main residence for
at least 2 years during the 5-year
period ending on the date of sale. You
may claim this exclusion only once in
any 2-year period.
If you don't meet the 2-year
requirement, you may be eligible to
claim a reduced exclusion, if you sell
your home because of an unforeseen
circumstance, such as a change in
employment or a divorce. A loss on the
sale of your home, however, isn't
deductible.
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