Mortgage Interest Deduction
Definition
An itemized deduction that allows homeowners to deduct interest paid on mortgage loans for their primary residence and one additional home. For mortgages taken out after December 15, 2017, the deduction is limited to interest on the first $750,000 of mortgage debt ($375,000 for married filing separately). Interest on home equity loans is deductible only if the funds are used to buy, build, or substantially improve the home.
Example
If you have a $400,000 mortgage at 7% interest, you pay roughly $28,000 in interest the first year, all of which is deductible as an itemized deduction.
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