Whether your interest expense is treated as investment interest, personal interest, or business interest depends on how and when you used the loan proceeds. See Pub. 535 for details.
In general, if you paid interest in 2008 that applies to any period after 2008, you can deduct only amounts that apply for 2008.taxmap/instr/i1040sa-003.htm#TXMP4a86db06taxmap/instr/i1040sa-003.htm#TXMP7c9e23f0
A home mortgage is any loan that is secured by your main home or second home. It includes first and second mortgages, home equity loans, and refinanced mortgages.
A home can be a house, condominium, cooperative, mobile home, boat, or similar property. It must provide basic living accommodations including sleeping space, toilet, and cooking facilities.taxmap/instr/i1040sa-003.htm#TXMP621e4727
If you took out any mortgages after October 13, 1987, your deduction may be limited. Any additional amounts borrowed after October 13, 1987, on a line-of-credit mortgage you had on that date are treated as a mortgage taken out after October 13, 1987. If you refinanced a mortgage you had on October 13, 1987, treat the new mortgage as taken out on or before October 13, 1987. But if you refinanced for more than the balance of the old mortgage, treat the excess as a mortgage taken out after October 13, 1987.
See Pub. 936 to figure your deduction if either (1) or (2) below applies. If you had more than one home at the same time, the dollar amounts in (1) and (2) apply to the total mortgages on both homes.
- You took out any mortgages after October 13, 1987, and used the proceeds for purposes other than to buy, build, or improve your home, and all of these mortgages totaled over $100,000 at any time during 2008. The limit is $50,000 if married filing separately. An example of this type of mortgage is a home equity loan used to pay off credit card bills, buy a car, or pay tuition.
- You took out any mortgages after October 13, 1987, and used the proceeds to buy, build, or improve your home, and these mortgages plus any mortgages you took out on or before October 13, 1987, totaled over $1 million at any time during 2008. The limit is $500,000 if married filing separately.
If the total amount of all mortgages is more than the fair market value of the home, additional limits apply. See Pub. 936.
Enter on line 10 mortgage interest and points reported to you on Form 1098 under your social security number (SSN). If this form shows any refund of overpaid interest, do not reduce your deduction by the refund. Instead, see the instructions for Form 1040, line 21. If you and at least one other person (other than your spouse if filing jointly) were liable for and paid interest on the mortgage, and the interest was reported on Form 1098 under the other person's SSN, report your share of the interest on line 11 (as explained in the line 11 instructions below).
If you paid more interest to the recipient than is shown on Form 1098, see Pub. 936 to find out if you can deduct the additional interest. If you can, attach a statement explaining the difference and enter
See attached to the right of line 10.
If you are claiming the mortgage interest credit (for holders of qualified mortgage credit certificates issued by state or local governmental units or agencies), subtract the amount shown on Form 8396, line 3, from the total deductible interest you paid on your home mortgage. Enter the result on line 10.
If you did not receive a Form 1098 from the recipient, report your deductible mortgage interest on line 11.
If you bought your home from the recipient, be sure to show that recipient's name, identifying number, and address on the dotted lines next to line 11. If the recipient is an individual, the identifying number is his or her social security number (SSN). Otherwise, it is the employer identification number. You must also let the recipient know your SSN. If you do not show the required information about the recipient or let the recipient know your SSN, you may have to pay a $50 penalty.
If you and at least one other person (other than your spouse if filing jointly) were liable for and paid interest on the mortgage, and the other person received the Form 1098, attach a statement to your return showing the name and address of that person. To the right of line 11, enter taxmap/instr/i1040sa-003.htm#TXMP47de64c3taxmap/instr/i1040sa-003.htm#TXMP42362a43
Points are shown on your settlement statement. Points you paid only to borrow money are generally deductible over the life of the loan. See Pub. 936 to figure the amount you can deduct. Points paid for other purposes, such as for a lender's services, are not deductible.taxmap/instr/i1040sa-003.htm#TXMP2c9ad52f
Generally, you must deduct points you paid to refinance a mortgage over the life of the loan. This is true even if the new mortgage is secured by your main home.
If you used part of the proceeds to improve your main home, you may be able to deduct the part of the points related to the improvement in the year paid. See Pub. 936 for details.
If you paid off a mortgage early, deduct any remaining points in the year you paid off the mortgage.
Enter the qualified mortgage insurance premiums you paid under a mortgage insurance contract issued after December 31, 2006, in connection with home acquisition debt that was secured by your first or second home. See Prepaid mortgage insurance on this page if you paid any premiums allocable to any period after 2008. Box 4 of Form 1098 may show the amount of premiums you paid in 2008. If you and at least one other person (other than your spouse if filing jointly) were liable for and paid the premiums in connection with the loan, and the premiums were reported on Form 1098 under the other person's SSN, report your share of the premiums on line 13.
Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006).
Mortgage insurance provided by the Department of Veterans Affairs and the Rural Housing Service is commonly known as a funding fee and guarantee fee respectively. These fees can be deducted fully in 2008 if the mortgage insurance contract was issued in 2008. Contact the mortgage insurance issuer to determine the deductible amount if it is not included in box 4 of Form 1098.taxmap/instr/i1040sa-003.htm#TXMP0a14b5a2
If you paid premiums for qualified mortgage insurance that are allocable to periods after 2008, such premiums are treated as paid in the year to which they are allocated. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. The two preceding sentences do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.
If, in 2007, you obtained a mortgage and paid qualified mortgage insurance premiums that are allocable to periods after 2007, you can allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. See Pub. 936.
At the time these instructions went to print, additional guidance was not yet issued for mortgage insurance premiums that were paid in 2008, but allocable to periods after 2008. For more details, go to www.irs.gov
, click on More Forms and Publications,
and then on What's Hot in forms and publications,
or see Pub. 553, Highlights of 2008 Tax Changes, available in early 2009.
You cannot deduct your mortgage insurance premiums if the amount on Form 1040, line 38, is more than $109,000 ($54,500 if married filing separately). If the amount on Form 1040, line 38, is more than $100,000 ($50,000 if married filing separately), your deduction is limited and you must use the worksheet on page A-7 to figure your deduction.
Qualified Mortgage Insurance Premiums Deduction Worksheet—
- See the instructions for line 13 on page A-6 to see if you must use this worksheet to figure your deduction.
| || |
|1.|| ||Enter the total premiums you paid in 2008 for qualified mortgage insurance for a contract issued after December 31, 2006||1.|| || |
|2.|| ||Enter the amount from Form 1040, line 38||2.|| || || |
|3.|| ||Enter $100,000 ($50,000 if married filing separately)||3.|| || || |
|4.|| ||Is the amount on line 2 more than the amount on line 3?|| || || || |
| || || No.||Your deduction is not limited. Enter the amount from line 1 above on Schedule A, line 13. Do not complete the rest of this worksheet. || || || || |
| || || Yes.||Subtract line 3 from line 2. If the result is not a multiple of $1,000 ($500 if married filing separately), increase it to the next multiple of $1,000 ($500 if married filing separately). For example, increase $425 to $1,000, increase $2,025 to $3,000; or if married filing separately, increase $425 to $500, increase $2,025 to $2,500, etc. ||4.|| || || |
|5.|| ||Divide line 4 by $10,000 ($5,000 if married filing separately). Enter the result as a decimal. If the result is 1.0 or more, enter 1.0 ||5.|| .|| |
|6.|| ||Multiply line 1 by line 5||6.|| || |
|7.|| ||Qualified mortgage insurance premiums deduction. Subtract line 6 from line 1. Enter the result here and on Schedule A, line 13 ||7.|| || |
| || |
Investment interest is interest paid on money you borrowed that is allocable to property held for investment. It does not include any interest allocable to passive activities or to securities that generate tax-exempt income.
Complete and attach Form 4952 to figure your deduction.taxmap/instr/i1040sa-003.htm#TXMP4572c664
You do not have to file Form 4952 if all three of the following apply.
- Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends.
- You have no other deductible investment expenses.
- You have no disallowed investment interest expense from 2007.
Alaska Permanent Fund dividends, including those reported on Form 8814, are not investment income.
For more details, see Pub. 550.