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Mortgage Tax Deduction Options You Should Know About

If you own a home, or if you are thinking about buying a home, one of the things you need to be aware of is a mortgage tax deduction. Home ownership is no not an inexpensive endeavor, especially since you are paying for the mortgage, the maintenance, and even real estate taxes. Mortgage tax deductions can help you achieve tax savings and help you make home ownership a little less financially stressful. Here are some of your options.

1. Mortgage Interest Deductions

One option that will allow you to cash in on a mortgage tax deduction is to use your interest on your mortgage. When you pay your mortgage, the idea here is to actually spend on the principal amount plus the interest of the loan. You can then use the latter to lower your taxes due.

To qualify, you must be legally liable for a mortgage and be willing to itemize your deductions.

The amount of interest you can claim is limited to how much you paid toward a mortgage; the amount is viable up to $750,000 if you bought the property after December 15, 2017.

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Owners who took out a loan prior to that date can still claim deductions on interest paid on up to $1 million in mortgage debt until the year 2025.

Homeowners can claim it only on the first tax year of your purchase.

Non-standard Housing

You can still take a mortgage tax deduction even if you do not live in a “standard house,” as long as your property has one of these qualifiers:

  • Has quarters designated for sleeping
  • Contains toilet facilities
  • Provides you with a place to cook food

Because of these technical qualifications, a boat or motor home can qualify for these types of tax write-offs.

Filing Separately When Married

For loans taken out after 2017, married couples who file separately can only claim up to $350,000 each for a new mortgage on their tax returns. The old limit of $500,000 per person still applies for mortgages prior to that date.

What You Should Be Aware Of

The new tax laws increased the standard deduction amount for taxpayers. You need to determine if itemizing your deductions for mortgage interest saves you more than taking the standard deduction.

Keep in mind that you will be paying less interest as the balance of your mortgage goes down. It lowers the benefit you receive from itemizing your mortgage interest payments.

It is possible to make extra payments on your mortgage interest. If you do this, the amount you are eligible to claim increases for the year you made the extra payments. Nevertheless, you should still compare what you will save when you either take the standard deduction or decide to itemize deductions.

2. Property Tax Deductions

Homeowners can also maximize their mortgage tax deductions by claiming property taxes paid to state and local authorities on their tax return.

This tax write-off can be especially beneficial to those living in areas with high state or local taxes. The current tax laws cap this deduction at $10,000 per year for 2018 and beyond.

The $10,000 limits apply to amounts you deduct for property and state income taxes, and this limit does not change whether you’re filing individually or as a married couple.

This amount is another factor to keep in mind when deciding whether it is worth the effort to itemize.

3. Medical Home Improvement Deductions

House entrance, wheelchair ramp for disabled people | Mortgage Tax Deduction Options You Should Know About

Medical needs can create a significant dent in your finances, and some of the financial stress may come from having to make physical changes to your home, via construction, in order to  accommodate a medical illness or disability.

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Fortunately, you can claim certain medical expenses, including the money paid for these improvements, on your tax return.

The following changes may qualify for a mortgage tax deduction:

  • Elevators when it is not possible to climb stairs
  • Changes in doorknobs levels when arthritis makes it hard to grip them
  • Telephones for the hearing-impaired
  • Doctor-prescribed whirlpool baths
  • Air-conditioning for respiratory problems as recommended by a physician
  • Ramps and other modifications for wheelchairs

To make such improvements tax deductible, ensure you have medical documentation for any changes you’ve made. You can only claim the full deduction if the changes do not increase the overall value of your home.

4. Home Equity Debt Refinancing Deductions

You can claim any interest you pay on home equity debt as a mortgage tax deduction if you used the money to improve your home. Those enhancements must not bring the value of your mortgage debt above the current $750,000 limit.

You also cannot claim this deduction if you used the money for non-housing-related improvements or expenses. Non-deductible purchases include paying for education debt or buying a new car.

5. Insurance Deductions

You cannot claim the payments you made on mortgage insurance premiums as a mortgage tax deduction, but it is possible to do it under the following circumstances:

  • You are renting out your home.
  • You are using your home to operate a business.

You may also deduct the amount you paid out of pocket to repair damages not covered by your insurance. Make sure to keep up with any paperwork related to repairs or other expenses you paid.

There are some limitations you need to keep in mind:

  • You cannot claim the first $100 of any loss as a deduction.
  • Your losses must total up to more than 10% of your current adjusted gross income.

The best thing you can do is get assistance from a tax professional if you have questions about whether you qualify for the exceptions listed here.


A mortgage takes up a significant percentage of your monthly budget. You can save more money in the long run, including taxes, by paying it as soon as you can. You can watch this strategy from Laura Pitkute:

Being more aware of mortgage tax deduction options can be a huge help for homeowners saddled with high mortgage repayments and other expenses, and thus, they deserve to be part of your tax plan. When in doubt, feel free to talk to a tax professional.

Do you know of other mortgage tax deduction options? Let us know below.

Up Next: Are Closing Costs Tax Deductible? 4 Deductions When Buying A Home

Mortgage Tax Deduction Options You Should Know About | https://help.taxreliefcenter.org/mortgage-tax-deduction-options/