Can You Claim Mortgage Interest on Taxes?

by Madison Garcia, studioD

Interest paid on home mortgages can be a sizable deduction for many taxpayers. Only the interest paid on qualifying loans for qualified homes are tax-deductible. To claim the deduction, you must choose to itemize rather than claim the standard deduction. Your lender will send you or give you access to a Form 1098 every year detailing the amount of qualified mortgage interest that you paid.

Qualifying Loans and Qualifying Homes

The interest you pay on home loans -- mortgage interest -- is a deductible expense. As long as your home is either your first or second home and has a kitchen, bathroom and sleeping area, you can claim this deduction. This means that interest on loans for RVs, boats, trailers and mobile homes are all potential deductions. Any interest on a loan that you took out before 1987 to buy, build or improve your home qualifies for this deduction. You may also deduct the mortgage interest you pay after a refinance.

Deduction Limitations

To deduct mortgage interest, you must itemize your deductions on Schedule A rather than take the standard deduction. This only makes sense if the sum of your itemized deductions -- expenses like mortgage interest, property taxes, state income taxes and charitable deductions -- exceed the standard deduction. For 2014, the standard deduction is $6,200 for individuals and $12,400 for married couples. Also, you can only deduct mortgage interest on loans up to $1 million.

Deducting Deferred Interest

You can still deduct interest expense on an adjustable-rate mortgage. However, the deduction may be limited for a period of time on deferred interest mortgages. That's because the IRS only allows you to deduct the amount of interest you actually paid during the tax year. If you have an adjustable-rate mortgage, you won't be able to claim a deduction during the years you defer the interest. When you make interest-only payments, however, the entire payment will be deductible.

Claiming the Deduction

Your mortgage lender will send you an annual Form 1098 that details the exact amount of mortgage interest you paid during the year. Both the amount in Box 1 (mortgage interest paid) and Box 2 (points paid) are deductible. Record the sum of the amounts listed in both boxes on line 10 of Schedule A. If you paid other qualified mortgage interest and your lender didn't report it on your 1098, you are allowed to deduct that amount on line 11. If you do this, keep documentation and proof of the expense in case you're ever audited by the IRS.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

Photo Credits

  • HAO ZHANG/iStock/Getty Images