What Is a Mortgage Exemption?

Malcolm Tatum
Malcolm Tatum

A mortgage exemption is a type of tax break or exemption that is extended to homeowners. Essentially, the homeowner can calculate the amount of the exemption using a formula provided by a tax agency, then claim that exemption when filing an annual tax return. The end result is that the amount of the exemption is deducted from the total amount of income reported on the return, aiding in reducing the total amount of taxes owed for the period. Qualifying for a mortgage exemption will depend on the criteria established by the tax agency, with those qualifications subject to change from one tax year to the next.

A house with a mortgage.
A house with a mortgage.

The process of determining the amount of a mortgage exemption normally involves identifying the criteria that must be met to receive one of several different types of exemptions relevant to the property type. For example, the net assessed value of the home will serve as the basis for calculating the taxes due. In order to obtain an exemption, the property may have to be considered the primary residence of the owner for a certain amount of time during the tax year. This would mean that while the owner may be able to claim a mortgage exemption on this primary residence, that same exemption would not be applicable to real estate that functions as rental property. Typically, other types of exemptions are associated with weekend homes of residential properties that are leased or rented by a landlord.

Since laws regarding mortgage exemption will vary from one jurisdiction to the next, this type of benefit may not be extended in all situations. For example, the owner of a mobile home that is currently located on a piece of mortgage property may be eligible for the exemption in some jurisdictions, but not in others. In addition, the exemption may be a set amount based on the net assessed value of the property, or some other method involving both the net assessed property value and the remaining balance on the mortgage may be employed.

In many locations around the world, homeowners must apply in advance in order to receive a mortgage exemption. Typically, there are deadlines for application that must be met in order to receive an exemption for the following calendar year. Failure to file for the exemption or provide the documentation necessary for processing can mean losing the exemption and not being allowed to claim the amount on a tax return. Typically, local agencies that aid in the assessment of property or a local tax agency can assist in understanding what information is required to process the application, as well as provide guidelines for submission.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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Discussion Comments


@Melonlity -- you have hit on a very complicated issue. For example, does the mortgage interest deduction tend to artificially inflate the price of homes? Does it discriminate against people who rent instead of buy? Is it the government's business to have a policy in place that encourages people to buy houses?

Those debates keep coming up time and time again. Regardless of what the proper answers to those questions are, I suspect the debate will rage on throughout most of our lifetimes.


@Soulfox -- one of the reasons that is still in place is because of the perception that it stimulates the housing market. Whether everyone who buys a house can take advantage of it or not doesn't matter much. The perception is that interest can be deducted and that inspires a lot of people to consider buying homes.


The biggest such exemption in the United States is the mortgage interest deduction. That one allows certain homeowners to take a tax cut depending on how much their mortgage is per year.

It is a very popular exemption among some homeowners, but controversial because only a few can take advantage of it because they will save more with their standard exemptions. The government has mounted several campaigns to get rid of the mortgage interest deduction and such efforts have been met with strong resistance every single time.

Still, it is viewed as low hanging fruit whenever Congress or the president is trying to find ways to increase revenue.

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