Is it possible to deduct mortgage interest for a home bought in Germany? My husband works for the Dept. of Defense here with partial non taxable income.

[stuttgartgents]

My husband receives a separate housing allowance as a Dept. of Defense civilian worker which is considered non-taxable income. I have never deducted any of the interest we pay on this home as I thought having a home outside of the States would not be possible. How or where do I check on this as we do pay quite a bit of mortgage interest in Euros., and or if we can even deduct this interest.

[IreneS]

Yes.  You can deduct the mortgage interest on your home in Germany.  The IRS does not specify that the home has to be in the U.S.--it only has to be your main home (or second home).

IRS Pub. 936 - Home Mortgage Interest Deduction states: 

Qualified Home. 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.

To enter your home mortgage interest, please follow these steps:

1. Click on Federal Taxes > Deductions & Credits.
2. In the Your Home section, click on the Start/Revisit box next to Mortgage Interest, Refinancing, and Insurance.  [See Screenshot #1, below.)
3. If you haven't entered any mortgage information yet, just proceed through the screens, entering the requested information on your first mortgage.  When finished, you will be brought to the Mortgage Deduction summary screen.
4. If you've already entered information on one loan, you will be brought to the Mortgage deduction summary screen.  Click the Add a Lender box on the Mortgage deduction summary screen. [Screenshot #2]
5. Proceed through the screens, entering the requested information.

You can only include the mortgage interest you paid in 2016 on your 2016 return.  If you wish you can amend your previous returns to include the interest.

[Zbucklyo]

You can only deduct the amount of the mortgage interest that is in excess of the non-taxable housing allowance.  You can't deduct expenses on which you never paid taxes.