Understanding of tax deductions for the second mortgage and housing equity loan

Please take a minute and understand tax deductions for the second mortgage and home equity loans interest. Among the most attractive features of second mortgages is the property of federal tax-deductibility of interest payments, which reduces the effective cost of loans to borrowers. However, before you sign the loan documents, it is important to understand just what can and can not be deduced in his statement of taxes.

To benefit from the tax deduction of mortgage interest, your mortgage must be set through your first or second home. Loans guaranteed by subsequent homes (for example, households third or fourth) did not qualify. A House, according to the Internal Revenue Service (IRS), must be a House, condominium, cooperative, a mobile home, boat, recreational vehicle or similar property which has sleeping, kitchen and toilet facilities.

IRS Publication 936 says that all their mortgages must fit into one or more of the following three categories at any time during the year.

1. Mortgages were taken on or before October 13, 1987 (great-grandfather of debt).

2. Mortgage taken after October 13, 1987, to buy, build, or improve your home (acquisition of housing debt), but only if all current fiscal year mortgages these any more debt great-grandfather amounted to $ 1 million or less ($500,000 or less if married submit separately).

3 Mortgage taken after October 13, 1987, other than buy, build, or improve your home (debt capital), but only if all current fiscal year these mortgages amounted to $100,000 or less ($50,000 or less if married submit separately) and amounted to no more than the value just reduced by (1) and (2) their home market.

Types of mortgage debts

A great-grandfather debt is fully deductible without limits.

Acquisition of housing, also known as acquisition indebtedness, debt is borrowed money to buy, build or substantially improve your residence qualified (an IRS term for your first or second home). A debt of capital, also known as equity debt, is money borrowed against the equity in their home qualified or money in cash from a mortgage refinance for any reason other than improvements to the home. To deduct the mortgage interest, it will be necessary to file a form 1040 (the long form with detailed deductions, not 1040 EZ). Your lender will send you a form 1098 ad the mortgage interest paid during the fiscal year. Check with a tax professional licensed to other conditions and limitations that may apply.

Maria Ny is an acclaimed freelance writer who has published many articles on mortgage. For more information on national mortgage bond for second & Home Equity mortgage loans. For mortgage advice plus 2 & capital refinancing tips, visit fixed home equity loans and second mortgage refinance loans.