Question:

Is interest on second mortgage tax deductible?

Answer:

Yes. Interest on first and second mortgage is tax deductible, as well as interest on HELOCs and HELs. Any loan secured against home property has certain tax deductibility.

The lender provides you with form 1098 to calculate how much interest you have paid and how much of the interest on the first and second mortgage is tax deductible. If your first or second mortgage was obtained prior to October 13, 1987, the loan is considered grandfathered and all interest paid on such loans is 100% tax deductible.

First and second mortgages used to purchase or rehab first and/or second homes constitute your home acquisition debt (according to IRS) and have tax deductible interest within special rules. Your combined mortgage debt cannot exceed $1 Million, or $500,000 if married and filing separately, for you to get fully deductible mortgage interest.

Other types of home equity debt, such as second mortgages, lines of credit and HELOCs used for any purposes other than buying and improving your home, (such as a cash-out refi), are your home equity debt. To get full interest deduction, this combined debt cannot exceed $100,000, or your home's value.

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