The home mortgage interest deduction is, for most people, the largest of the personal tax deductions claimed each year and can result in a sizable tax cut for most taxpayers. That's because the majority of your mortgage payment is applied to pay for mortgage interest with just a fraction of the payment—at least in the early years of a mortgage loan—applied to pay down the principal. The tax law around home mortgage interest deductions can be confusing as there are different rules regarding primary residences, second homes, home equity loans and lines of credit, and the deductibility of points paid to close a loan. Your best bet to determine how to maximize your home mortgage interest federal tax deduction is to consult with a tax preparer—especially if you're a first-time homeowner—or read IRS Publication 936, Home Mortgage Interest Deduction.
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|Jennifer Mathes, Ph.D.|