A mortgage interest tax deduction is a deduction that you take against your first and second homes to reduce your tax liability. This deduction was placed into law to help encourage Americans to purchase homes.
Owning a second home is a luxury that many like to enjoy but it does not yield many tax deductions or credits. One of the few deductible expenses on a second home is the home interest tax deduction. You can also deduct your property taxes on both homes.
The limit on the amount that can be deductible is a home mortgage amount that does not exceed $1,000.000.00 on both your first and second homes combined.
In order to take any of these deductions, you must itemize. Make sure that your standard deduction is not higher than adding up all of your itemized deductions. This will help you get the most deductions possible and lower your tax bill.
Can I take the deduction if I rent out my second home?
You can take this deduction as long as you resided at the second property for at least 14 days of the year for personal use. If you do rent it out for a portion of the year, you must use the home for personal use for at least 10% of the amount of time that it was being rented out. If you do not qualify due to the amount of time you rented out the property then it will fall under business expenses.