The simple answer is: yes, under specific requirements and qualifications. To understand if your mortgage payment is tax-deductible, we must break down what a mortgage payment entails.
What does your mortgage include?
Typically, a mortgage consists of these four components:
How do you qualify?
For a homeowner to qualify for tax deduction, they must:
Have filed an IRS 1040 form with included itemized deductions.
Now, let’s break it down even more. Earlier, we mentioned the different components of a mortgage. With that in mind, we can better understand which parts of your mortgage will qualify for tax deduction.
The principal, or the amount you borrow from the lender, is not eligible for this deduction. However, interest and taxes are. Thanks to the Tax Cuts and Job Acts (TCJA), homeowners are eligible to deduct interest on loans up to $750,000 (in effect from 2018-2025). If you took out your home loan prior to 2018, you’re still in luck - you are eligible to deduct on a loan up to $1,000,000.
Property taxes can also be tax deducted. If you closed on your home within the tax year, you likely paid your property taxes in your closing costs. If you purchased your home outside of the tax year, you can find your property tax amount on the IRS 1098 form.
Last but not least, what about insurance? This one has some exceptions. Generally, your home and title insurance are not eligible for tax deductions. However, private mortgage insurance (PMI) does. The amount of PMI you pay qualifies for deductions and will also be reported on the IRS 1098 form.