Interest payments on a residential mortgage, assuming the mortgage isn't larger than the purchase price of the house, are fully deductible in most circumstances.
that's a key reason why homeownership is a superb tax shelter. Mortgage interest on a
Vacation home is also deductible, either as a rent expense or as an additional itemized deduction.
If you own a third home for personal purposes, the mortgage interest is treated as
"consumer loan" interest and is not deductible.
Shouldn't your home be a tax shelter?
The Benefits of buying Points
For home buyers, deductible expenses include settlement charges for points. Deductible points
are up-front charges for the use of money (not services). One point equals 1% of the loan amount.
Points paid by either the buyer or seller are deductible by the buyer in the year of purchase.
If you are buying a home and need financial assistance from the seller, consider having them
pay for as many points as possible, thereby increasing your tax deduction.
