How to determine if the taxpayer can take the Mortgage Interest Deduction

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.

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.

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.