Is there Alternative Minimum Tax mortgage interest deduction?
Answer:Yes, there is. However, the Alternative Minimum Tax mortgage interest deduction exists only for home equity debt used to build, buy or improve a residence.
Compared to the regular tax system, where home equity and second mortgage tax deduction exists to $100,000 used for any purposes, with the Alternative Minimum Tax (AMT) rules mortgage interest tax deduction is available on a much more limited basis.
Before this rule, one could use a home equity loan or line of credit for up to $100,000 to buy a car, for example, and write off mortgage interest. In a year when you have to file taxes under the Alternative Minimum Tax (AMT) code, you are better off looking for a low rate car loan, as there are no tax advantages on that.
What is the Alternative Minimum Tax (AMT)?
The Alternative Minimum Tax (AMT) is an alternative tax code designed for wealthier taxpayers. It disallows or restricts some of the most common tax deductions, including general homeownership benefits. It is not updated as often as the regular tax code, and an increasing number of middle class taxpayers seem to be hit by the AMT. In 2007 the Congress has introduced changes in the AMT to avoid applying AMT to consumers it was never intended for.
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