How Do I Claim a Mortgage on My Taxes?

To deduct mortgage interest, you must itemize your deductions using Schedule A.

If you have a mortgage or home equity loan on your main or second home, you may deduct interest paid on your mortgage from income. You may also deduct "points" paid to the bank to obtain your mortgage because "points" are prepaid interest on your mortgage. To deduct mortgage interest, you must itemize your deductions using Schedule A, as opposed to taking the standard deduction.

Things You'll Need

• Tax forms
• Mortgage interest statement

Instructions

1. Gather the appropriate documents. If you paid mortgage interest, you should have received from your lender a mortgage interest statement or a Form 1098 reflecting the yearly amount of mortgage interest that you paid.

2. Determine if your mortgage interest is deductible. Mortgage interest is generally deductible if the mortgage is a "secured debt" on a "qualified home." A "secured debt" is a loan secured by your home in that the lender is able to take your home in the event of a loan default. A "qualified home" is your main home or your second home, including a house, condominium, cooperative, mobile home, house trailer, boat or similar property that has sleeping, cooking and toilet facilities.

3. Determine how much of your mortgage interest is deductible. You can deduct all of your mortgage interest for mortgages in one of three categories: (1) mortgages taken out on or before Oct. 13, 1987, (2) mortgages used to buy, build or improve your home where the total does not exceed $1 million ($500,000 if you use married filing separately status) or (3) mortgages not falling in categories (1) or (2) that total $100,000 or less ($50,000 or less if you use married filing separately status) provided that these other mortgages do not exceed the fair market value of the equity in your home. If your mortgages fall outside all three categories, you need to use a worksheet in Internal Revenue Service Publication 936 to determine how much of your mortgage interest is deductible.

4. Complete the mortgage interest portion of Schedule A. Schedule A is used to calculate a taxpayer's itemized deductions. You should include on line 10 the amount of deductible home mortgage interest and points reported to you by your lender on Form 1098. You should include on line 11 the amount of deductible home mortgage interest not reported on Form 1098, and you should include on line 12 the amount of deductible points not reported on Form 1098.

5. Complete the remainder of Schedule A. You should complete all other applicable deductions permitted on Schedule A. Other permissible deductions include state and local income or sales taxes, gifts to charity and certain medical and dental expenses. You should total all of your Schedule A deductions on line 29. Then report your itemized deductions on Form 1040. Your total itemized deductions should be reported on line 40a on Form 1040.

References

• Internal Revenue Service: Instructions for Schedule A
• IRS: Instructions for Form 1040, page 35, line 40a
• IRS: Publication 936
• IRS: Tax Topic 504-Home Mortgage Points