Itemized Deductions/Standard Deductions > Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)

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Frequently Asked Tax Questions

Itemized Deductions/Standard Deductions - Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)

Rev. date: 1/2009

I have a mortgage for my primary residence and a second mortgage for land that I intend to build a home on. Can the interest be deducted for the second mortgage?

Interest Expense
Investment Income and Expenses
Itemized Deduction, Home Mortgage Interest
Loan
Mortgage
Primary Residence
Reduced home mortgage interest deduction.

Unless you have begun construction of a home on the bare land that you can occupy within 24 months the interest you paid on the second mortgage would not qualify as deductible mortgage interest.

Rev. date: 1/2009

If I must deduct points over the life of my mortgage, and I have a 30 year mortgage, does this mean that I divide the points paid by 30 and enter that amount on Schedule A?

Closing Costs
Deduction, Itemized
Interest Expense
Itemized Deduction, Home Mortgage Interest
Loan
Loan Origination Fee

No, you don't divide the points by 30. If you choose to use the straight-line method, you need to divide the points by the number of payments over the term of the loan and deduct points for a year according to the number of payments made in the year.

If the loan ends prematurely, due to payoff or refinance with a different lender, for example, then the remaining points are deducted in that year.
Points not included in Form 1098 (PDF) (usually not included on a refinance) should be entered on Form 1040, Schedule A (PDF), Itemized Deductions.

Rev. date: 1/2009

Is the mortgage interest and property tax on a second residence deductible?

Deductible Mortgage Interest
Interest Expense
Itemized Deduction, Home Mortgage Interest
Loan
Mortgage
Mortgage Interest
Primary Residence

The mortgage interest on a second home which you use as a residence for some portion of the taxable year, is generally deductible if the interest satisfies the same requirements for deductibility as interest on a primary residence.

Real estate taxes paid on your primary and second residence are, generally, deductible.
Deductible real estate taxes include any state, local, or foreign taxes on real property levied for the general public welfare.
Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property.

Rev. date: 1/2009

Is interest on a home equity line of credit deductible as a second mortgage?

Deductible Mortgage Interest
Interest Expense
Itemized Deduction, Home Mortgage Interest
Loan
Mortgage
Mortgage Interest Credit
Reduced home mortgage interest deduction.

You may deduct home equity debt interest, as an itemized deduction, if all the following conditions apply:

You are legally liable to pay the interest
You pay the interest in the tax year
The debt is secured with your home
You do not exceed certain limitations

Rev. date: 1/2009

I took out a home equity loan to pay off personal debts. Is this interest deductible? Where do I enter this amount on my tax return?

Home Equity Debt
Interest Expense
Itemized Deduction, Home Mortgage Interest
Loan

A loan taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts may qualify as home equity debt.

The interest would be deducted on Form 1040, Schedule A (PDF), Itemized Deductions.
The amount you can deduct as interest on home equity debt is subject to certain limitations.

Rev. date: 1/2009

Our home was seriously damaged by flooding last year. Are there special provisions for claiming a loss since our home is located in a declared disaster area?

Deduction, Itemized
Disaster
Theft and Casualty Losses

Casualty losses not compensated for by insurance or otherwise are generally deductible only in the year the casualty occurred. Consider the following:

If you have a deductible loss from a disaster in an area that is officially designated by the President of the United States as eligible for federal disaster assistance, you can choose to deduct that loss on your return for the year immediately preceding the loss year.
You may treat the loss as having occurred in either the current year or the previous year, whichever provides the best tax results for you.
If you have already filed your return for the preceding year, the loss may be claimed by filing an amended return,
Form 1040X (PDF), Amended U.S. Individual Income Tax Return.

For more information on disaster area losses (including flood losses), refer to:

Tax Topic 515, Disaster Area Losses (Including Flood Losses)
Publication 547, Casualties, Disasters and Thefts
Publication 584, Casualty, Disaster, and Theft Loss Workbook, can be used to help you catalog your property
Disaster Relief, The Newsroom @ irs.gov


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