Mortgage Interest Tax Deduction for 2011, 2012

A mortgage interest tax deduction is a deduction that you take against the home you own to reduce your tax liability. The government originally started this deduction to boost home ownership.

In most cases you can deduct the interest on both your first and second homes. Any homes beyond that amount will not qualify. You could be saving close to $2,000 annually by owning a home and deducting your mortgage interest.

How do I claim a mortgage interest tax deduction?

In order to take this deduction you must own your home and have a mortgage interest statement from your lender. You will need to file a 1040 long form and you must itemize your tax return.

Your mortgage interest included the interest you paid on loans to buy a home, home equity loan, or a construction loan. You may not deduct interest on a home equity loan above and beyond $100,000. If you are married filing separately then this amount is cut in half. There may also be some limitations if you own more than your home is worth. As far as deducting interest on a home construction loan, you may only deduct the interest paid on the first $1,000,000.

If you own the home along with another individual then you both can only deduct the amount the interest that each one paid on the loan.

How will this affect my AMT?

If you are currently subject to the alternative minimum tax (AMT) then a home equity line of credit interest deduction will help offset the AMT cost.

Visit TurboTax Online to use their free tax deduction calculators and to learn more about the mortgage interest tax deduction.