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Frequently Asked Tax Questions

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

  1. I have a mortgage for land that I intend to build a home on. Can I deduct the interest for the mortgage?
  2. Is interest on a home equity line of credit deductible as a second mortgage?
  3. I took out a home equity loan secured by my main home to pay off personal debts. Is this interest deductible, and if so, where do I enter this amount on my tax return?
  4. Is the mortgage interest and real property tax I pay on a second residence deductible?
  5. If I must deduct points over the life of my mortgage, and I have a 30-year mortgage, should I divide the points paid by 30 and enter that amount on Schedule A?

Rev. date: 11/10/2016

I have a mortgage for land that I intend to build a home on. Can I deduct the interest for the mortgage?

No, you can't deduct interest on land that you keep and intend to build a home on. However, some interest may be deductible once construction begins. You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it's ready for occupancy. The 24-month period can start any time on or after the day construction begins. As a qualified home, the interest paid may qualify as deductible mortgage interest, with certain limitations.

Rev. date: 11/10/2016

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

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

Rev. date: 11/10/2016

I took out a home equity loan secured by my main home to pay off personal debts. Is this interest deductible, and if so, where do I enter this amount on my tax return?

A loan secured by your personal residence but taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts, may still qualify as home equity debt. Home equity debt is limited to the fair market value of the home reduced by home acquisition debt, up to a total of $100,000 ($50,000 if married filing separately). You may deduct the interest paid during the year on home equity debt as an itemized deduction on Schedule A (Form 1040), Itemized Deductions, generally on line 10.

Rev. date: 11/10/2016

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

Yes, state and local real property taxes are generally deductible.  Mortgage interest paid on a second residence is also deductible as long as you don't rent out the residence during the tax year, and the mortgage satisfies the same requirements for deductible interest as on a primary residence. If you do rent out the residence, you must use it for more than 14 days or more than 10% of the number of days you rent it out, whichever is longer, for the mortgage interest to be deductible.

Rev. date: 11/10/2016

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

No, while you must deduct the points over the life of the loan ratably (equally), you don't divide the points by 30 years. Instead, you divide the points by the number of payments scheduled over the term of the loan (360 months in the case of a 30-year mortgage) and deduct points each year according to the number of payments you made in that year (less than twelve payments in some cases).