What is a Mortgage Deduction?

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  • Written By: N. Madison
  • Edited By: Niki Foster
  • Last Modified Date: 16 October 2019
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In the United States, a citizen who owns his or own home is entitled to deduct mortgage interest from his or her taxable income. This tax break is called a mortgage deduction. Essentially, it rewards homeowners by allowing them to keep more of their money and spend less of it paying taxes. However, the mortgage deduction doesn’t qualify as a dollar-for-dollar write-off. Instead, it reduces taxable income.

The mortgage deduction is available to taxpayers without regard to whether or not they own more than one property. Interest can be deducted for a primary or secondary residence. Interest on a line of credit or home-equity loan is deductible as well. As the mortgage deduction is only for those paying mortgage loan interest, personal loans are not eligible for this write-off.

As with every type of deduction, there are limits. First, you can only take the mortgage deduction for a home loan for which you are personally liable. Second, your main or second home must be the collateral for the loan in question. Mortgage loans for third, fourth, or subsequent homes are not eligible for the mortgage deduction.

There are also limits on the amount of mortgage deduction an individual can take. For example, if all your mortgages amount to more than the fair value of your home, the amount of allowable deduction may be limited. If your mortgages amount to more than one million US dollars (USD) combined, the deduction may be limited as well.


In order to take advantage of the mortgage deduction, a taxpayer must itemize deductions. This means he or she must have deductions that exceed the standard deduction in the United States. However, many individuals find that exceeding the amount for taking the standard deduction is quite easy.

A variety of constructions can be considered homes. A house, mobile home, or condominium can be considered a home. Even a boat or recreational vehicle, with cooking, bathroom, and sleeping quarters, can be considered a home. As such, owners of this kind of property may be eligible to take the mortgage deduction.

In addition to mortgage interest deduction, points paid on the purchase of a home, mortgage taxes, and a variety of fees may be deductible. The Internal Revenue Service (IRS) provides free information regarding the mortgage deduction, as well as a variety of deductions online. Additionally, the IRS provides telephone assistance and many print publications free of charge.


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