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Requirements for Home Mortgage
Interest Deductions
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Requirements
You
can deduct home mortgage interest if you meet the following
requirements:
1) You must file form 1040 and itemize deductions on
Schedule A (Form 1040).
2) You must be legally liable for the loan. You cannot deduct
payments you make for someone else if you are not
legally
liable to make them. Both you and the
lender must intend that
the loan be repaid. In addition, there must
be a true
debtor-creditor relationship between you and the
lender.
3) The mortgage must be a secured debt on a qualified home.
A "secured debt" is one in which you sign an instrument (such as a
mortgage, deed of trust, or land contract) that:
* Makes your ownership in a qualified home security for payment
of debt.
* Provides, in any case of default, that your home could satisfy the
debt.
* Is recorded or satisfies similar requirements under state law.
A "qualified home" means your main home or your second home.
A home includes a house, condominium, cooperative, mobile
home, house trailer, boat or similar property that has sleeping,
cooking and toilet facilities.
Mortgage Categories
If all of your mortgages fit into one or more of the following
categories at all times during the tax year, you can deduct all of
the interest on your mortgage on your tax return.
1) Mortgages you took out on or before October 13, 1987. This is
known as "Grandfather
Debt".
2) Mortgages you took out after October 13, 1987 to buy, build, or
improve your home. These loans are called "home
acquisition loans"
and up to $ 1 million of such debt qualifies
for a mortgage interest deduction ($ 500,000 or
less if married
filing separately).
3) Mortgages you took out after October 13, 1987 other than to buy,
build, or improve your home. This is called
"home equity
debt".
You may deduct up to $100,000 of such debt for the
interest deduction ($50,000 or less if married
filing separately).
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