If you have a mortgage, you probably have a mortgage interest deduction. Your deduction is based on your aquisition indebtedness (the amount you borrowed when you originally bought the house less payments made). This could be different from your actual loan if you refinanced and took money out of the house. You are entitled to deduct interest on the first $1,000,000 of aquisition indebtedness, which must be invested in the house, and the first $100,000 of home equity indebtedness, which can be used for any purpose (buy a car, TV, whatever). Here are two articles on aquisition indebtedness and home equity indebtedness from Mortgage Guide 101 to read (especially if you want your head to explode):
http://www.mortgageguide101.com/acquisition-indebtedness.aspx
http://www.mortgageguide101.com/equity-indebtedness.aspx
I was going to talk about points next, but I need a day to recover from this, so I will talk about them tomorrow. Call me with questions at 818-317-6035 or email me at bstonercpa@sbcglobal.net and I will try to answer them.
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