Drake Tax - 1098: Mortgage Interest Deduction Limitation

Article #: 10641

Last Updated: November 08, 2024


Tags: Drake Tax15810

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Note  This article comprises former KB articles 15810 and 10641. It is herein referred to as KB 10641.

Beginning in taxable years after December 31, 2018, and before January 1, 2026, taxpayers may only deduct interest on $750,000 of qualified residence loans. The limit is $375,000 for a married taxpayer filing a separate return. These are down from the prior limits of $1 million, or $500,000 for a married taxpayer filing a separate return. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home. As under prior law, the loan must not exceed the cost of the home and meet other requirements. See IR-2018-32 for examples.

Note  For interest paid on home equity loans and lines of credit to be deductible, the loan must be used to buy, build or substantially improve the taxpayer’s home that secures the loan.

Use the DEDM screen to generate worksheet Wks DEDINT in View/Print mode. This worksheet calculates the amount of mortgage interest that is deductible. This screen can also be accessed by clicking the Loan Limit Worksheet link on screen A or 1098.

In order for the calculated amount to flow to Schedule A, you must select Carry deductible interest to Schedule A only on screen DEDM; If you do not, you must prorate the calculated amount to any form or schedule to which the amount applies.

Important  If you enter data on screen DEDM, do not use screen 1098; otherwise, amounts on screen 1098 are ignored.

See Publication 936 for details on determining whether the mortgage interest is fully deductible or, if a limit applies, calculating the allowable mortgage interest that is deductible.