Mortgage interest: interesting because of the tax deduction.
Mar 02 '01
The Bottom Line Mortgage interest is the largest tax deduction for many people, especially where housing costs are high. Otherwise, it's just another expense of home ownership.
Mortgage interest is the interest you pay on a loan used to purchase a primary or secondary residence.
It's important to know how much mortgage interest you pay each year because you can use it as a tax deduction if you itemize deductions. For many people, especially those living in areas of high housing prices, the mortgage interest deduction is likely to be their largest deductible expense.
The rules governing deductibility of mortgage interest are actually quite complicated, but for most people, the full interest amount is deductible. However, if you've done a cash-out refinance or taken a home equity loan, some of your mortgage interest may not be deductible.
The company that processes your mortgage payments is required to send you a form 1098 at the beginning of each year telling how much interest you paid during the previous year.
"Points," another type of mortgage interest, are discussed in another article.
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