Hey Dave,
My wife and I live in Florida, and we are thinking about buying a second home in Maine to live in during the summer months. Will we be able to deduct the mortgage interest on our taxes?
Nelson
Nelson,
If you itemize deductions you may deduct the mortgage interest on two homes, your primary residence and one other that is used for personal use. The mortgage interest is limited by the underlying loans, and generally you cannot deduct the interest on more than $1,000,000 acquisition debt (combined) plus $100,000 home equity debt (combined), and these limits are halved if your filing status is Married Filing Separately.
Acquisition debt is loan proceeds used to buy, build, or improve the home, and home equity debt is mortgage loan proceeds used for other things. Generally, if the acquisition debt exceeds $1,000,000, up to $100,000 of the excess may be treated as home equity debt if such debt does not equal or exceed $100,000 already. There are also other requirements, such as the mortgage loan(s) must be secured by the home. More information may be obtained from IRS Publication 936 Home Mortgage Interest Deduction, as well as worksheets to calculate your deduction should the loans exceed the underlying limits.
Deductibly yours,
Dave