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Frequently Asked Tax Questions

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

  1. 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?
  2. Is interest on a home equity line of credit deductible as a second mortgage?
  3. 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?
  4. Our home was seriously damaged by flooding last year. Are there special provisions for the timing of claiming a loss since our home is located in a federally declared disaster area?
  5. Is the mortgage interest and property tax on a second residence deductible?
  6. 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?

Rev. date: 2/4/2010

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?

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: 2/15/2011

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

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
     • The total amount of the home equity indebtedness does not exceed the fair market value of the home (at the time the debt was incurred) and does not exceed $100,000.

Rev. date: 1/1/2011

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?

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.

Rev. date: 1/1/2011

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

Casualty losses not compensated for by insurance or otherwise are generally deductible only in the year the casualty occurred. Consider the following:
For more information on disaster area losses (including flood losses), refer to:

Rev. date: 1/1/2011

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

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.  The limitation for mortgage interest on your primary and secondary residence is $1,000,000 for acquisition indebtedness and $100,000 for home equity indebtedness.
    • Deductible real estate taxes include any state, local, or foreign taxes based on the value of the  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, such as assessments for sidewalks, water mains, sewer lines, parking lots, and similar improvements.

Rev. date: 1/1/2011

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?

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.