As the 2023 tax season unfolds, many Americans are taking advantage of every possible deduction to save on taxes or even receive a refund. One of the deductions that homeowners can claim is the mortgage interest deduction, which allows them to reduce their taxable income by deducting the interest paid on their mortgage. This deduction is meant to incentivize homeownership, with the aim of encouraging more people to buy homes, as reported by MARCA on March 23, 2023.
The Internal Revenue Service (IRS) sets limits for the mortgage interest deduction that can be applied to loans for second homes. According to a report by Rocket Mortgage on March 3, 2033, the total amount of mortgage interest that can be deducted depends on when the mortgage was taken out and the purpose of the loan. There is no limit on the amount of mortgage interest that can be deducted for mortgages carried out before October 13, 1987. Mortgages taken out between October 13, 1987, and December 16, 2017, for the purpose of purchasing a home or making significant improvements have a $500,000 maximum for single filers, including both home acquisition debt and grandfathered debt. Mortgages taken out after December 16, 2017, have a limit of $375,000 in total for both types of debt.
It’s worth noting that if a taxpayer is filing jointly with their spouse or husband, the limits for mortgage interest deductions are doubled, which can be a significant advantage for couples who own a home together.
Overall, the mortgage interest deduction can be a valuable tax benefit for homeowners who want to reduce their taxable income and lower the amount of taxes they owe to the IRS. It’s important to consult with a tax professional to ensure that all deductions are claimed accurately and appropriately.