What does Mortgage Interest mean?
Mortgage interest as defined for tax purposes is interest a taxpayer pays on a home loan. This amount is considered an itemized deduction that can be subtracted from a taxpayer's adjusted gross income to determine taxable income.
Mortgage interest can be for any loan secured by a primary residence or a second home. The loan can be a home mortgage or home equity loan. For the interest to be deductible, the taxpayer must be legally obligated to pay the debt in addition to actually making the payments. Therefore, taxpayers cannot obtain additional deductions by paying a friend's or relative's mortgage payment in addition to their own.
Interest paid related to a mortgage or home equity loan for homes beyond the second is not deductible.
To include mortgage interest as a deduction, taxpayers need to include Form 1098, Mortgage Interest Statement, with their tax return.