Each year, there is a limit as to the amount that an individual can deduct from their taxes in response to the amount of mortgage interest that the individual has paid over the course of the year. In the cases listed below, the average limitation has been defined. Some individuals will notice that they are further limited. This occurs in specific and individualized situations.
For these people, the specific limitations are calculated in a case-by-case basis. However, these limitations are well-defined for the general population and the cases that require extended limitations have been noted. Despite the fact that there are two different types of mortgages which can be taken out by individuals for their residencies, both loans are subject to limitations regarding the amount of interest that can be deducted, though the amounts do differ in quantity. These two types of loans are defined by the situations to which they are applicable and have been created by the United States federal government in order to allow individuals ease in determining which type of mortgage or home loan they have taken out. It is very easy for an individual to use these definitions in order to determine the type of mortgage to which they are indebted by their financial institutions.
First, there is the type of loan or mortgage that allows an individual to purchase a home or build a home on a specific location with the intention of the owner to live at the residency. This is known as home acquisition debt. The second type of mortgage loan is that which is used by individuals in order to refurbish or improve upon an existing residential structure. This is known as home equity debt.
Overall, the amount of interest that an individual may deduct on their taxes when it comes to home acquisition debt is not to exceed one million dollars ($1,000,000.00), as specified by the government and the Internal Revenue Service. This is the standard interest limitation that has been declared for primary homes, as well as secondary residencies. However, the amount is reduced for individuals who are married and filing their taxes separately. A person who is married, but filing their taxes separately from their spouse, may not claim more than half-a-million dollars, or five hundred thousand dollars ($500,000.
00). Home equity debt has a different amount put in place as the limitation. Main homes and secondary residencies may not have an interest deduction on one's taxes that is in excess of one hundred thousand dollars ($100,000.00). When individuals are married but filing their taxes separately, the amount is reduced by one-half.
These specified individuals can not exceed a deduction of fifty thousand dollars ($50,000). Even with these limitations, some individuals have to be aware that they could be limited even further when it comes to the amount of interest that the individual may deduct in response to their home acquisition debt. This is the case when the home of an individual has a fair market value below the amount of debt that the individual possesses. This is calculated on a case-by-case basis and dependent upon specific situations.
Limits are put in place based on the individuals loan amount, filing status and adjusted gross income in order to make sure that individuals receive the appropriately priced return.
Susan Duey represents, Low Mortgage Rate marketplace offering search for low mortgage rates from our network of accredited lenders. For more information please visit Amount of mortgage interest that I can deduct