topic Mortgage Interest deductibility in Deductions & credits

Mortgage Interest deductibility

DL64 — Tue, 01 Feb 2022 14:53:48 GMT

We paid cash for our home in 2014 and later got a HELOC for 100K to cover renovations. In 2021, we retired and decided to put a conventional 1st mortgage on this home and pay off the balance on the prior HELOC in the process.

The money from the new mortgage was used to pay off the HELOC and purchase a new fifth-wheel (second home while traveling) and a super duty truck to tow with.

I have two 1098 forms. . . one for interest paid on the old HELOC which I believe is fully deductible and one for interest paid on our new conventional first mortgage in 2021.

Can't seem to work through whether the mortgage interest is deductible on the new first mortgage with certainty. Not sure how to answer the questions. Thanks for your help!

Re: Mortgage Interest deductibility

Carl — Tue, 01 Feb 2022 15:16:18 GMT

Assuming 100% of the original HELOC was used to improve your primary residence, that interest is fully deductible.

For the conventional mortgage, the percentage of interest equal to the percentage of the loan used to pay off the mortgage is deductible on the SCH A.

The percentage used to purchase the new 5th wheel "might" be deductible, but not sure.

The percentage used to purchase the truck is just flat out not deductible at all unfortunately.

Re: Mortgage Interest deductibility

DianeW777 — Tue, 01 Feb 2022 15:27:27 GMT

You are allowed to deduct mortgage interest on your first and second home. A home for IRS purposes is described as follows:

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

If your new truck has the requirements then you can fully deduct the interest on that portion of the loan as well if the total if amount of the loan is below $750,000.

As @Carl pointed out, otherwise you will have to prorate the amount of deductible mortgage interest that represents the 5th wheel.

IRS Publication 936

Re: Mortgage Interest deductibility

Carl — Wed, 02 Feb 2022 00:00:04 GMT

If your new truck has the requirements then you can fully deduct the interest

Did you get things backwards perhaps? Unless that new truck is a semi rig, I seriously doubt the interest paid on it is deductible. I'm not aware of how a passenger vehicle (which would include a pickup truck I would think) could qualify as any type of a residence.