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Publication 936 Cat. No. 10426G Contents

Reminders ...... 1 Department of the Home Introduction ...... 2 Treasury Internal Part I. Home Mortgage Interest ...... 2 Revenue Mortgage Secured Debt ...... 3 Service Qualified Home ...... 4 Special Situations ...... 4 Interest Points ...... 5 Mortgage Insurance Premiums ..... 8 Deduction Form 1098, Mortgage Interest Statement ...... 8 How To Report ...... 9 Special Rule for Tenant-Stockholders in For use in preparing Cooperative Housing Corporations ...... 9 2020 Returns Part II. Limits on Home Mortgage Interest Deduction ...... 9 Home Acquisition Debt ...... 10 Grandfathered Debt ...... 10 Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year ... 12

How To Get Tax Help ...... 15

Index ...... 17

Reminders Mortgage insurance premiums. The item- ized deduction for mortgage insurance premi- ums has been extended through 2020. You can claim the deduction on line 8d of Schedule A (Form 1040) for amounts that were paid or ac- crued in 2020. Home equity loan interest. No matter when the indebtedness was incurred, you can no lon- ger deduct the interest from a loan secured by your home to the extent the loan proceeds weren't used to buy, build, or substantially im- prove your home. Home mortgage interest. You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebt- edness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from in- debtedness incurred before December 16, 2017. Future developments. For the latest informa- tion about developments related to Pub. 936, such as legislation enacted after it was pub- lished, go to IRS.gov/Pub936. Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Pho- tographs of missing children selected by the Get forms and other information faster and easier at: Center may appear in this publication on pages • IRS.gov (English) • IRS.gov/Korean (한국어) that would otherwise be blank. You can help • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) bring these children home by looking at the • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

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527 527 Residential Rental Property category.) If one or more of your mortgages Introduction doesn’t fit into any of these categories, use Part 530 530 Tax Information for Homeowners II of this publication to figure the amount of in- This publication discusses the rules for deduct-

535 terest you can deduct. ing home mortgage interest. 535 Business Expenses The three categories are as follows. Part I contains general information on home mortgage interest, including points and mort- See How To Get Tax Help at the end of this 1. Mortgages you took out on or before Octo- gage insurance premiums. It also explains how publication for information about getting these ber 13, 1987 (called grandfathered debt). to report deductible interest on your tax return. publications. 2. Mortgages you (or your spouse if married Part II explains how your deduction for home filing a joint return) took out after October mortgage interest may be limited. It contains 13, 1987, and prior to December 16, 2017 Table 1, which is a worksheet you can use to Part I. Home (see binding contract exception below), to figure the limit on your deduction. Mortgage Interest buy, build, or substantially improve your Comments and suggestions. We welcome home (called home acquisition debt), but only if throughout 2020 these mortgages your comments about this publication and sug- This part explains what you can deduct as plus any grandfathered debt totaled $1 gestions for future editions. home mortgage interest. It includes discussions million or less ($500,000 or less if married You can send us comments through on points, mortgage insurance premiums, and filing separately). IRS.gov/FormComments. Or, you can write to how to report deductible interest on your tax re- Exception. A taxpayer who enters into the Internal Revenue Service, Tax Forms and turn. a written binding contract before Decem- Publications, 1111 Constitution Ave. NW, ber 15, 2017, to close on the purchase of IR-6526, Washington, DC 20224. Generally, home mortgage interest is any in- terest you pay on a loan secured by your home a principal residence before January 1, Although we can’t respond individually to (main home or a second home). The loan may 2018, and who purchases such residence each comment received, we do appreciate your be a mortgage to buy your home, or a second before April 1, 2018, is considered to have feedback and will consider your comments and mortgage. incurred the home acquisition debt prior to suggestions as we revise our tax forms, instruc- December 16, 2017. tions, and publications. Do not send tax ques- You can’t deduct home mortgage interest tions, tax returns, or payments to the above ad- unless the following conditions are met. 3. Mortgages you (or your spouse if married dress. • You file Form 1040 or 1040-SR and item- filing a joint return) took out after Decem- ize deductions on Schedule A (Form ber 15, 2017, to buy, build, or substantially Getting answers to your tax questions. improve your home (called home acquisi- If you have a tax question not answered by this 1040). • The mortgage is a secured debt on a quali- tion debt), but only if throughout 2020 publication or the How To Get Tax Help section these mortgages plus any grandfathered at the end of this publication, go to the IRS In- fied home in which you have an ownership interest. Secured Debt and Qualified debt totaled $750,000 or less ($375,000 or teractive Tax Assistant page at IRS.gov/ less if married filing separately). Help/ITA where you can find topics by using the Home are explained later. search feature or viewing the categories listed. Both you and the lender must intend that the The dollar limits for the second and third cate- loan be repaid. gories apply to the combined mortgages on Getting tax forms, instructions, and pub- your main home and second home. lications. Visit IRS.gov/Forms to download Note. Interest on home equity loans and See Part II for more detailed definitions of current and prior-year forms, instructions, and lines of credit are deductible only if the bor- grandfathered debt and home acquisition debt. publications. rowed funds are used to buy, build, or substan- You can use Figure A to check whether your Ordering tax forms, instructions, and tially improve the taxpayer’s home that secures home mortgage interest is fully deductible. publications. Go to IRS.gov/OrderForms to the loan. The loan must be secured by the tax- order current forms, instructions, and publica- payer’s main home or second home (qualified tions; call 800-829-3676 to order prior-year residence), and meet other requirements. forms and instructions. The IRS will process your order for forms and publications as soon Fully deductible interest. In most cases, you as possible. Do not resubmit requests you’ve can deduct all of your home mortgage interest. already sent us. You can get forms and publica- How much you can deduct depends on the date tions faster online. of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. If all of your mortgages fit into one or more of Useful Items the following three categories at all times during You may want to see: the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into Publication more than one category, add the debt that fits in

523 523 Selling Your Home each category to your other debt in the same

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Figure A. Is My Home Mortgage Interest Fully Deductible? (Instructions: Include balances of ALL mortgages secured by your main home and second home.)

Start Here:

Do you meet the conditions to deduct home You can’t deduct the interest payments as home No 2 mortgage interest? mortgage interest.

Yes

Yes Were all of your home mortgages taken out Your home mortgage interest is fully deductible. You on or before October 13, 1987? don’t need to read Part II of this publication.

No

Were all of your home mortgages taken out after October 13, 1987, used to buy, build, or substantially No Go to Part II of this publication to determine the improve the main home secured by that main home limits on your deductible home mortgage interest. mortgage or used to buy, build, or substantially improve the second home secured by that second home mortgage, or both?

Yes

Were your (or your spouse’s if married ling a joint Were your (or your spouse’s if married ling a joint return) mortgage balances $750,000 or less return) grandfathered debt plus home acquisition 4 ($375,000 or less if married ling separately) No debt balances $750,000 or less ($375,000 or less if No (or $1 million or less ($500,000 if married ling married ling separately) (or $1 million or less separately) if all debt was incurred prior to ($500,000 if married ling separately) if all debt was December 16, 2017) at all times during the year? 3 incurred prior to December 16, 2017) at all times during the year?3 Yes Yes

You must itemize deductions on Schedule A (Form 1040). The loan must be a secured debt on a qualied home. See Part I, Home Mortgage Interest, earlier.  See Table 2 in Part II of this publication for where to deduct other types of interest payments.  A taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, is considered to have incurred the home acquisition debt prior to December 16, 2017, and may use the 2017 threshold amounts of $1,000,000 ($500,000 for married ling separately). 4 See Part II of this publication for more information about grandfathered debt and home acquisition debt.

Secured Debt • Is recorded or is otherwise perfected under cause of a lien on your general assets or if it is a any state or local law that applies. security interest that attaches to the property You can deduct your home mortgage interest without your consent (such as a mechanic's lien In other words, your mortgage is a secured or judgment lien). only if your mortgage is a secured debt. A se- debt if you put your home up as collateral to A debt isn’t secured by your home if it once cured debt is one in which you sign an instru- protect the interests of the lender. If you can't was, but is no longer secured by your home. ment (such as a mortgage, deed of trust, or pay the debt, your home can then serve as pay- land contract) that: ment to the lender to satisfy (pay) the debt. In Wraparound mortgage. This isn’t a se- • Makes your ownership in a qualified home this publication, mortgage will refer to secured cured debt unless it is recorded or otherwise security for payment of the debt; debt. perfected under state law. • Provides, in case of default, that your home could satisfy the debt; and Debt not secured by home. A debt isn’t se- cured by your home if it is secured solely be-

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Example. Beth owns a home subject to a home. For information on residential rental You can continue treating a destroyed home mortgage of $40,000. She sells the home for property, see Pub. 527. as a qualified home if, within a reasonable pe- $100,000 to John, who takes it subject to the riod of time after the home is destroyed, you: $40,000 mortgage. Beth continues to make the More than one second home. If you have • Rebuild the destroyed home and move into payments on the $40,000 note. John pays more than one second home, you can treat only it, or $10,000 down and gives Beth a $90,000 note one as the qualified second home during any • Sell the land on which the home was loca- secured by a wraparound mortgage on the year. However, you can change the home you ted. treat as a second home during the year in the home. Beth doesn't record or otherwise perfect This rule applies to your main home and to a the $90,000 mortgage under the state law that following situations. • If you get a new home during the year, you second home that you treat as a qualified applies. Therefore, the mortgage isn't a secured home. debt and John can't deduct any of the interest can choose to treat the new home as your he pays on it as home mortgage interest. second home as of the day you buy it. • If your main home no longer qualifies as Time-sharing arrangements. You can treat a your main home, you can choose to treat it home you own under a time-sharing plan as a Choice to treat the debt as not secured by qualified home if it meets all the requirements. your home. You can choose to treat any debt as your second home as of the day you stop using it as your main home. A time-sharing plan is an arrangement between secured by your qualified home as not secured two or more people that limits each person's in- by the home. This treatment begins with the tax • If your second home is sold during the year or becomes your main home, you can terest in the home or right to use it to a certain year for which you make the choice and contin- part of the year. ues for all later tax years. You can revoke your choose a new second home as of the day choice only with the consent of the IRS. you sell the old one or begin using it as Rental of time-share. If you rent out your You may want to treat a debt as not secured your main home. time-share, it qualifies as a second home only if by your home if the interest on that debt is fully you also use it as a home during the year. See Divided use of your home. The only part of deductible (for example, as a business ex- Second home rented out, earlier, for the use re- your home that is considered a qualified home pense) whether or not it qualifies as home mort- quirement. To know whether you meet that re- is the part you use for residential living. If you gage interest. This may allow you, if the limits in quirement, count your days of use and rental of use part of your home for other than residential Part II apply, more of a deduction for interest on the home only during the time you have a right living, such as a home office, you must allocate other debts that are deductible only as home to use it or to receive any benefits from the the use of your home. You must then divide mortgage interest. rental of it. both the cost and fair market value of your home between the part that is a qualified home Cooperative apartment owner. If you own Married taxpayers. If you're married and file a and the part that isn't. Dividing the cost may af- stock in a cooperative housing corporation, see joint return, your qualified home(s) can be fect the amount of your home acquisition debt, the Special Rule for Tenant-Stockholders in Co- owned either jointly or by only one spouse. which is limited to the cost of your home plus operative Housing Corporations near the end of the cost of any improvements. (See this Part I. Home Ac- Separate returns. If you're married filing quisition Debt in Part II, later.) separately and you and your spouse own more than one home, you can each take into account Qualified Home Renting out part of home. If you rent out only one home as a qualified home. However, if part of a qualified home to another person (ten- you both consent in writing, then one spouse ant), you can treat the rented part as being used For you to take a home mortgage interest de- can take both the main home and a second by you for residential living only if all of the fol- home into account. duction, your debt must be secured by a quali- lowing conditions apply. fied home. This means your main home or your • The rented part of your home is used by second home. A home includes a house, con- the tenant primarily for residential living. Special Situations dominium, cooperative, mobile home, house • The rented part of your home isn't a trailer, boat, or similar property that has sleep- self-contained residential unit having sepa- ing, cooking, and toilet facilities. This section describes certain items that can be rate sleeping, cooking, and toilet facilities. included as home mortgage interest and others • You don't rent (directly or by sublease) the The interest you pay on a mortgage on a that can't. It also describes certain special situa- same or different parts of your home to home other than your main or second home tions that may affect your deduction. more than two tenants at any time during may be deductible if the proceeds of the loan the tax year. If two persons (and depend- were used for business, investment, or other Late payment charge on mortgage pay- ents of either) share the same sleeping deductible purposes. Otherwise, it is consid- ment. You can deduct as home mortgage in- quarters, they are treated as one tenant. ered personal interest and isn't deductible. terest a late payment charge if it wasn't for a specific service performed in connection with Office in home. If you have an office in your mortgage loan. Main home. You can have only one main your home that you use in your business, see home at any one time. This is the home where Pub. 587, Business Use of Your Home. It ex- Mortgage prepayment penalty. If you pay off you ordinarily live most of the time. plains how to figure your deduction for the busi- your home mortgage early, you may have to ness use of your home, which includes the busi- pay a penalty. You can deduct that penalty as Second home. A second home is a home that ness part of your home mortgage interest. you choose to treat as your second home. home mortgage interest provided the penalty isn't for a specific service performed or cost in- Home under construction. You can treat a Second home not rented out. If you have curred in connection with your mortgage loan. home under construction as a qualified home a second home that you don’t hold out for rent for a period of up to 24 months, but only if it be- or resale to others at any time during the year, Sale of home. If you sell your home, you can comes your qualified home at the time it is you can treat it as a qualified home. You don't deduct your home mortgage interest (subject to ready for occupancy. have to use the home during the year. any limits that apply) paid up to, but not includ- The 24-month period can start any time on ing, the date of the sale. Second home rented out. If you have a or after the day construction begins. second home and rent it out part of the year, Example. John and Peggy Harris sold their you must also use it as a home during the year Home destroyed. You may be able to con- home on May 7. Through April 30, they made for it to be a qualified home. You must use this tinue treating your home as a qualified home home mortgage interest payments of $1,220. home more than 14 days or more than 10% of even after it is destroyed in a fire, storm, tor- The settlement sheet for the sale of the home the number of days during the year that the nado, earthquake, or other casualty. This showed $50 interest for the 6-day period in May home is rented at a fair rental, whichever is lon- means you can continue to deduct the interest up to, but not including, the date of sale. Their ger. If you don't use the home long enough, it is you pay on your home mortgage, subject to the mortgage interest deduction is $1,270 ($1,220 considered rental property and not a second limits described in this publication. + $50).

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Prepaid interest. If you pay interest in ad- amount allocated to state or local property your home. With a reverse mortgage, you retain vance for a period that goes beyond the end of taxes is subject to the limitation on the deduc- title to your home. Depending on the plan, your the tax year, you must spread this interest over tion for state and local taxes. However, you're reverse mortgage becomes due, with interest, the tax years to which it applies. You can de- not required to use this special method to figure when you move, sell your home, reach the end duct in each year only the interest that qualifies your deduction for mortgage interest and real of a pre-selected loan period, or die. Because as home mortgage interest for that year. How- estate taxes on your main home. reverse mortgages are considered loan advan- ever, there is an exception that applies to ces and not income, the amount you receive points, discussed later. Mortgage assistance payments under sec- isn't taxable. Generally, any interest (including tion 235 of the National Housing Act. If you original issue discount) accrued on a reverse Mortgage interest credit. You may be able to qualify for mortgage assistance payments for mortgage is considered interest on home equity claim a mortgage interest credit if you were is- lower-income families under section 235 of the debt and isn’t deductible. sued a mortgage credit certificate (MCC) by a National Housing Act, part or all of the interest state or local government. Figure the credit on on your mortgage may be paid for you. You Rental payments. If you live in a house before Form 8396, Mortgage Interest Credit. If you can't deduct the interest that is paid for you. final settlement on the purchase, any payments take this credit, you must reduce your mortgage you make for that period are rent and not inter- interest deduction by the amount of the credit. No other effect on taxes. Don’t include est. This is true even if the settlement papers these mortgage assistance payments in your in- See Form 8396 and Pub. 530 for more infor- call them interest. You can't deduct these pay- come. Also, don't use these payments to re- mation on the mortgage interest credit. ments as home mortgage interest. duce other deductions, such as real estate Ministers' and military housing allowance. taxes. Mortgage proceeds invested in tax-exempt If you're a minister or a member of the uni- securities. You can't deduct the home mort- Divorced or separated individuals. If a di- formed services and receive a housing allow- gage interest on grandfathered debt if you used vorce or separation agreement requires you or ance that isn't taxable, you can still deduct your the proceeds of the mortgage to buy securities your spouse or former spouse to pay home home mortgage interest. or certificates that produce tax-free income. mortgage interest on a home owned by both of “Grandfathered debt” is defined in Part II of this Hardest Hit Fund and Emergency Home- you, the payment of interest may be alimony. publication. See the discussion of owners' Loan Programs. You can use a spe- Payments for cial method to figure your deduction for mort- jointly-owned home under Alimony in Pub. 504, Refunds of interest. If you receive a refund of gage interest and real estate taxes on your Divorced or Separated Individuals. interest in the same tax year you paid it, you main home if you meet the following two condi- must reduce your interest expense by the Redeemable ground rents. In some states tions. amount refunded to you. If you receive a refund (such as Maryland), you can buy your home of interest you deducted in an earlier year, you 1. You received assistance under: subject to a ground rent. A ground rent is an ob- must generally include the refund in income in ligation you assume to pay a fixed amount per a. A State Housing Finance Agency the year you receive it. However, you need to year on the property. Under this arrangement, (State HFA) Hardest Hit Fund pro- include it only up to the amount of the deduction you're leasing (rather than buying) the land on gram in which program payments that reduced your tax in the earlier year. This is which your home is located. could be used to pay mortgage inter- true whether the interest overcharge was refun- est, or If you make annual or periodic rental pay- ded to you or was used to reduce the outstand- ments on a redeemable ground rent, you can ing principal on your mortgage. If you need to b. An Emergency Homeowners' Loan deduct them as mortgage interest. include the refund in income, report it on Program administered by the Depart- A ground rent is a redeemable ground rent if Schedule 1 (Form 1040), line 8. ment of Housing and Urban Develop- all of the following are true. If you received a refund of interest you over- ment (HUD) or a state. • Your lease, including renewal periods, is paid in an earlier year, you will generally receive 2. You meet the rules to deduct all of the for more than 15 years. a Form 1098, Mortgage Interest Statement, mortgage interest on your loan and all of • You can freely assign the lease. showing the refund in box 4. For information the real estate taxes on your main home. • You have a present or future right (under about Form 1098, see Form 1098, Mortgage In- state or local law) to end the lease and buy terest Statement, later. If you meet these conditions, then you can de- the lessor's entire interest in the land by For more information on how to treat refunds duct all of the payments you actually made dur- paying a specific amount. of interest deducted in earlier years, see Recov- ing the year to your mortgage servicer, the • The lessor's interest in the land is primarily eries in Pub. 525, Taxable and Nontaxable In- State HFA, or HUD on the home mortgage (in- a security interest to protect the rental pay- come. cluding the amount shown in box 3 of Form ments to which he or she is entitled. 1098-MA, Mortgage Assistance Payments), but Payments made to end the lease and to buy SBA disaster home loans. Interest paid on not more than the sum of the amounts shown the lessor's entire interest in the land aren't de- disaster home loans from the Small Business on Form 1098, Mortgage Interest Statement, in ductible as mortgage interest. Administration (SBA) is deductible as mortgage box 1 (mortgage interest received from interest if the requirements discussed earlier payer(s)/borrower(s)), box 5 (mortgage insur- Nonredeemable ground rents. Payments under Home Mortgage Interest are met. ance premiums), and box 10 (real property on a nonredeemable ground rent aren't mort- taxes). You may first allocate amounts paid to gage interest. You can deduct them as rent if mortgage interest up to the amount shown on they are a business expense or if they are for Points Form 1098. You may then use any reasonable rental property. method to allocate the remaining balance of the The term “points” is used to describe certain payments to real property taxes, mortgage in- Reverse mortgages. A reverse mortgage is a charges paid, or treated as paid, by a borrower surance premiums, and principal. Regardless of loan where the lender pays you (in a lump sum, to obtain a home mortgage. Points may also be how you determine the deductible amount un- a monthly advance, a line of credit, or a combi- called loan origination fees, maximum loan der this special safe harbor method, any nation of all three) while you continue to live in charges, loan discount, or discount points.

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Figure B. Are My Points Fully Deductible This Year?

Start Here:

No Is the loan secured by your main home?

Yes

Is the payment of points an established No business practice in your area?

Yes

Were the points paid more than the Yes amount generally charged in your area?

No

Do you use the cash method of No accounting?

Yes

Were the points paid in place of Yes amounts that ordinarily are separately stated on the settlement sheet?

No

Were the funds you provided (other than those you borrowed from your lender or No mortgage broker), plus any points the seller paid, at least as much as the points charged?*

Yes

Yes Did you take out the loan to substantially improve your main home?

No

Did you take out the loan to buy or build No your main home?

Yes

Were the points gured as a percentage No of the principal amount of the mortgage?

Yes

Is the amount paid clearly shown as No points on the settlement statement?

Yes

You can fully deduct the points this year You cannot fully deduct the points this on Schedule A (Form 1040). year. See the discussion on Points, earlier.

* The funds you provided are not required to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose.

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A borrower is treated as paying any points 2. Paying points is an established business points ($3,000). Two points ($2,000) were for that a home seller pays for the borrower's mort- practice in the area where the loan was prepaid interest, and one point ($1,000) was gage. See Points paid by the seller, later. made. charged for services, in place of amounts that ordinarily are stated separately on the settle- 3. The points paid weren't more than the ment statement. Bill paid the points out of his General Rule points generally charged in that area. private funds, rather than out of the proceeds of You generally can't deduct the full amount of 4. You use the cash method of accounting. the new loan. The payment of points is an es- points in the year paid. Because they are pre- This means you report income in the year tablished practice in the area, and the points paid interest, you generally deduct them ratably you receive it and deduct expenses in the charged aren't more than the amount generally over the life (term) of the mortgage. See Deduc- year you pay them. Most individuals use charged there. Bill's first payment on the new tion Allowed Ratably next. If the loan is a home this method. loan was due July 1. He made six payments on the loan in 2020 and is a cash basis taxpayer. equity, line of credit, or credit card loan and the 5. The points weren't paid in place of Bill used the funds from the new mortgage proceeds from the loan are not used to buy, amounts that ordinarily are stated sepa- to repay his existing mortgage. Although the build, or substantially improve the home, the rately on the settlement statement, such new mortgage loan was for Bill's continued points are not deductible. as appraisal fees, inspection fees, title ownership of his main home, it wasn't for the fees, attorney fees, and property taxes. For exceptions to the general rule, see De- purchase or substantial improvement of that duction Allowed in Year Paid, later. 6. The funds you provided at or before clos- home. He can't deduct all of the points in 2020. ing, plus any points the seller paid, were at He can deduct two points ($2,000) ratably over least as much as the points charged. The the life of the loan. He deducts $67 [($2,000 ÷ Deduction Allowed Ratably funds you provided aren't required to have 180 months) × 6 payments] of the points in been applied to the points. They can in- 2020. The other point ($1,000) was a fee for If you don't meet the tests listed under Deduc- clude a down payment, an escrow de- services and isn't deductible. tion Allowed in Year Paid, later, the loan isn't a posit, earnest money, and other funds you home improvement loan, or you choose not to paid at or before closing for any purpose. Example 2. The facts are the same as in deduct your points in full in the year paid, you You can't have borrowed these funds from Example 1, except that Bill used $25,000 of the can deduct the points ratably (equally) over the your lender or mortgage broker. loan proceeds to substantially improve his life of the loan if you meet all of the following home and $75,000 to repay his existing mort- tests. 7. You use your loan to buy or build your gage. Bill deducts 25% ($25,000 ÷ $100,000) of main home. 1. You use the cash method of accounting. the points ($2,000) in 2020. His deduction is This means you report income in the year 8. The points were figured as a percentage $500 ($2,000 × 25% (0.25)). you receive it and deduct expenses in the of the principal amount of the mortgage. Bill also deducts the ratable part of the re- year you pay them. Most individuals use maining $1,500 ($2,000 − $500) that must be 9. The amount is clearly shown on the settle- this method. spread over the life of the loan. This is $50 ment statement (such as the Settlement [($1,500 ÷ 180 months) × 6 payments] in 2020. 2. Your loan is secured by a home. (The Statement, Form HUD-1) as points The total amount Bill deducts in 2020 is $550 home doesn't need to be your main charged for the mortgage. The points may ($500 + $50). home.) be shown as paid from either your funds or the seller's. 3. Your loan period isn't more than 30 years. Special Situations 4. If your loan period is more than 10 years, Note. If you meet all of these tests, you can the terms of your loan are the same as choose to either fully deduct the points in the This section describes certain special situations other loans offered in your area for the year paid, or deduct them over the life of the that may affect your deduction of points. same or longer period. loan. Original issue discount. If you don't qualify to 5. Either your loan amount is $250,000 or Home improvement loan. You can also fully either deduct the points in the year paid or de- less, or the number of points isn't more deduct in the year paid points paid on a loan to duct them ratably over the life of the loan, or if than: substantially improve your main home if tests you choose not to use either of these methods, a. 4, if your loan period is 15 years or (1) through (6) are met. the points reduce the issue price of the loan. less; or This reduction results in original issue discount, Second home. You can't fully deduct which is discussed in chapter 4 of Pub. 535. b. 6, if your loan period is more than 15 ! in the year paid points you pay on years. CAUTION loans secured by your second home. Amounts charged for services. Amounts You can deduct these points only over the life of charged by the lender for specific services con- Example. You use the cash method of ac- the loan. nected to the loan aren't interest. Examples of counting. In 2020, you took out a $100,000 these charges are: home mortgage loan payable over 20 years. Refinancing. Generally, points you pay to refi- • Appraisal fees, The terms of the loan are the same as for other nance a mortgage aren't deductible in full in the • Department of Veterans Affairs (VA) fund- 20-year loans offered in your area. You paid year you pay them. This is true even if the new ing fees, $4,800 in points. You made 3 monthly pay- mortgage is secured by your main home. • Mortgage insurance premiums, ments on the loan in 2020. You can deduct $60 However, if you use part of the refinanced • Notary fees, and [($4,800 ÷ 240 months) x 3 payments] in 2020. mortgage proceeds to substantially improve • Preparation costs for the mortgage note or In 2021, if you make all twelve payments, you your main home and you meet the first six tests deed of trust. will be able to deduct $240 ($20 x 12). listed under Deduction Allowed in Year Paid, You can't deduct these amounts as points ei- earlier, you can fully deduct the part of the ther in the year paid or over the life of the mort- Deduction Allowed in Year Paid points related to the improvement in the year gage. you paid them with your own funds. You can You can fully deduct points in the year paid if deduct the rest of the points over the life of the Points paid by the seller. The term “points” you meet all the following tests. (You can use loan. includes loan placement fees that the seller Figure B as a quick guide to see whether your pays to the lender to arrange financing for the points are fully deductible in the year paid.) Example 1. In 1999, Bill Fields got a mort- buyer. 1. Your loan is secured by your main home. gage to buy a home. In 2020, Bill refinanced that mortgage with a 15-year $100,000 mort- Treatment by seller. The seller can't de- (Your main home is the one you ordinarily duct these fees as interest. But they are a sell- live in most of the time.) gage loan. The mortgage is secured by his home. To get the new loan, he had to pay three ing expense that reduces the amount realized

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by the seller. See Pub. 523 for information on Form 1098. The mortgage interest statement Limit on deduction. If your adjusted gross in- selling your home. you receive should show not only the total inter- come on Form 1040 or 1040-SR, line 11, is est paid during the year, but also your mortgage more than $100,000 ($50,000 if your filing sta- Treatment by buyer. The buyer reduces insurance premiums and deductible points paid tus is married filing separately), the amount of the basis of the home by the amount of the during the year. See Form 1098, Mortgage In- your mortgage insurance premiums that are seller-paid points and treats the points as if he terest Statement, later. otherwise deductible is reduced and may be or she had paid them. If all the tests under De- eliminated. See line 8d in the Instructions for duction Allowed in Year Paid, earlier, are met, Schedule A (Form 1040) and complete the the buyer can deduct the points in the year Mortgage Insurance Mortgage Insurance Premiums Deduction paid. If any of those tests aren't met, the buyer Premiums Worksheet to figure the amount you can de- deducts the points over the life of the loan. duct. If your adjusted gross income is more than If you need information about the basis of You can treat amounts you paid during 2020 for $109,000 ($54,500 if married filing separately), your home, see Pub. 523 or Pub. 530. qualified mortgage insurance as home mort- you cannot deduct your mortgage insurance gage interest. The insurance must be in con- premiums. Funds provided are less than points. If you nection with home acquisition debt, and the in- meet all the tests in Deduction Allowed in Year surance contract must have been issued after Paid, earlier, except that the funds you provided 2006. Form 1098, Mortgage were less than the points charged to you (test Interest Statement (6)), you can deduct the points in the year paid, Qualified mortgage insurance. Qualified up to the amount of funds you provided. In addi- mortgage insurance is mortgage insurance pro- If you paid $600 or more of mortgage interest tion, you can deduct any points paid by the vided by the Department of Veterans Affairs, (including certain points and mortgage insur- seller. the Federal Housing Administration, or the Ru- ance premiums) during the year on any one ral Housing Service, and private mortgage in- mortgage, you will generally receive a Form Example 1. When you took out a $100,000 surance (as defined in section 2 of the Home- 1098 or a similar statement from the mortgage mortgage loan to buy your home in December, owners Protection Act of 1998, as in effect on holder. You will receive the statement if you pay you were charged one point ($1,000). You meet December 20, 2006). interest to a person (including a financial institu- all the tests for deducting points in the year Mortgage insurance provided by the Depart- tion or cooperative housing corporation) in the paid, except the only funds you provided were a ment of Veterans Affairs is commonly known as course of that person's trade or business. A $750 down payment. Of the $1,000 charged for a funding fee. If provided by the Rural Housing governmental unit is a person for purposes of points, you can deduct $750 in the year paid. Service, it is commonly known as a guarantee furnishing the statement. You spread the remaining $250 over the life of fee. The funding fee and guarantee fee can ei- the mortgage. ther be included in the amount of the loan or The statement for each year should be sent paid in full at the time of closing. These fees can to you by January 31 of the following year. A Example 2. The facts are the same as in be deducted fully in 2020 if the mortgage insur- copy of this form will also be sent to the IRS. Example 1, except that the person who sold you ance contract was issued in 2020. Contact the your home also paid one point ($1,000) to help mortgage insurance issuer to determine the de- The statement will show the total interest you get your mortgage. In the year paid, you ductible amount if it is not reported in box 5 of you paid during the year, any mortgage insur- can deduct $1,750 ($750 of the amount you Form 1098. ance premiums you paid, and if you purchased were charged plus the $1,000 paid by the a principal residence during the year, it will also seller). You spread the remaining $250 over the Special rules for prepaid mortgage insur- show the points paid during the year, including life of the mortgage. You must reduce the basis ance. Generally, if you paid premiums for seller-paid points, that are deductible as inter- of your home by the $1,000 paid by the seller. qualified mortgage insurance that are properly est to the extent you do not exceed the home allocable to periods after the close of the tax acquisition debt limit. See Part II, Limits on Excess points. If you meet all the tests in De- year, such premiums are treated as paid in the Home Mortgage Interest Deduction, later. How- duction Allowed in Year Paid, earlier, except period to which they are allocated. You must al- ever, the statement shouldn't show any interest that the points paid were more than generally locate the premiums over the shorter of the sta- that was paid for you by a government agency. paid in your area (test (3)), you deduct in the ted term of the mortgage or 84 months, begin- year paid only the points that are generally ning with the month the insurance was As a general rule, Form 1098 will include charged. You must spread any additional points obtained. No deduction is allowed for the una- only points that you can fully deduct in the year over the life of the mortgage. mortized balance if the mortgage is satisfied be- paid. However, it may report points that you fore its term. This paragraph does not apply to can't deduct, particularly if you are filing married Mortgage ending early. If you spread your qualified mortgage insurance provided by the filing separately or have mortgages for multiple deduction for points over the life of the mort- Department of Veterans Affairs or the Rural properties. You must take care to deduct only gage, you can deduct any remaining balance in Housing Service. those points legally allowable. Additionally, cer- the year the mortgage ends. However, if you re- tain points not included on Form 1098 may also finance the mortgage with the same lender, you Example. Ryan purchased a home in May be deductible, either in the year paid or over the can't deduct any remaining balance of spread of 2020 and financed the home with a 15-year life of the loan. See the earlier discussion of points. Instead, deduct the remaining balance mortgage. Ryan also prepaid all of the $9,240 in Points to determine whether you can deduct over the term of the new loan. private mortgage insurance required at the time points not shown on Form 1098. A mortgage may end early due to a prepay- of closing in May. Since the $9,240 in private ment, refinancing, foreclosure, or similar event. mortgage insurance is allocable to periods after Prepaid interest on Form 1098. If you pre- 2020, Ryan must allocate the $9,240 over the paid interest in 2020 that accrued in full by Jan- Example. Dan paid $3,000 in points in shorter of the life of the mortgage or 84 months. uary 15, 2021, this prepaid interest may be in- 2009 that he had to spread out over the 15-year Ryan's adjusted gross income (AGI) for 2020 is cluded in box 1 of Form 1098. However, you life of the mortgage. He deducts $200 points $76,000. Ryan can deduct $880 ($9,240 ÷ 84 x can't deduct the prepaid amount for January per year. Through 2020, Dan has deducted 8 months) for qualified mortgage insurance pre- 2021 in 2020. (See Prepaid interest, earlier.) $2,200 of the points. miums in 2020. For 2021, Ryan can deduct You will have to figure the interest that accrued Dan prepaid his mortgage in full in 2020. He $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is for 2021 and subtract it from the amount in can deduct the remaining $800 of points in $100,000 or less. box 1. You will include the interest for January 2020. In this example, the mortgage insurance 2021 with other interest you pay for 2021. premiums are allocated over 84 months, which Limits on deduction. You can't fully deduct is shorter than the life of the mortgage of 15 Refunded interest. If you received a refund of points paid on a mortgage that exceeds the lim- years (180 months). mortgage interest you overpaid in an earlier its discussed in Part II. See the Table 1 Instruc- year, you will generally receive a Form 1098 tions, later, for line 13.

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showing the refund in box 4. See Refunds of in- Mortgage proceeds used for business or in- However, you can treat a debt as secured by terest, earlier. vestment. If your home mortgage interest de- the stock to the extent that the proceeds are duction is limited under the rules explained in used to buy the stock under the allocation of in- Mortgage insurance premiums. The Part II, but all or part of the mortgage proceeds terest rules. See chapter 4 of Pub. 535 for de- amount of mortgage insurance premiums you were used for business, investment, or other tails on these rules. paid during 2020 should be shown in box 5 of deductible activities, see Table 2 near the end Form 1098. See Mortgage Insurance Premi- of this publication. It shows where to deduct the Figuring deductible home mortgage inter- ums, earlier. part of your excess interest that is for those ac- est. Generally, if you're a tenant-stockholder, tivities. The Table 1 Instructions for line 16 in you can deduct payments you make for your How To Report Part II explain how to divide the excess interest share of the interest paid or incurred by the co- among the activities for which the mortgage operative. The interest must be on a debt to proceeds were used. buy, build, change, improve, or maintain the co- Generally, you can deduct the home mortgage operative's housing, or on a debt to buy the interest and points reported to you on Form Special Rule for land. 1098 on Schedule A (Form 1040), line 8a. How- Figure your share of this interest by multiply- ever, any interest showing in box 1 of Form Tenant-Stockholders in ing the total by the following fraction. 1098 from a home equity loan, or a line of credit Cooperative Housing or credit card loan secured by the property is Your shares of stock in the not deductible if the proceeds were not used to Corporations cooperative buy, build, or substantially improve a qualified A qualified home includes stock in a coopera- The total shares of stock home. If you paid more deductible interest to in the cooperative the financial institution than the amount shown tive housing corporation owned by a ten- on Form 1098, show the portion of the deducti- ant-stockholder. This applies only if the ten- ant-stockholder is entitled to live in the house or Cooperative apartment owner. If you ble interest that was omitted from Form 1098 on own a cooperative apartment, you must reduce line 8b. Attach a statement to your paper return apartment because of owning stock in the co- operative. your home mortgage interest deduction by your explaining the difference and print “See at- share of any cash portion of a patronage divi- tached” next to line 8b. Cooperative housing corporation. This is a dend that the cooperative receives. The patron- age dividend is a partial refund to the coopera- Deduct home mortgage interest that wasn't corporation that meets all of the following condi- tions. tive housing corporation of mortgage interest if reported to you on Form 1098 on Schedule A paid in a prior year. (Form 1040), line 8b. If you paid home mort- 1. Has only one class of stock outstanding. If you receive a Form 1098 from the cooper- gage interest to the person from whom you 2. Has no stockholders other than those that ative housing corporation, the form should show bought your home, show that person's name, only the amount you can deduct. address, and taxpayer identification number own the stock who can live in a house, (TIN) on the dotted lines next to line 8b. The apartment, or house trailer owned or Limits on deduction. To figure how the seller must give you this number and you must leased by the corporation. limits discussed in Part II apply to you, treat give the seller your TIN. A Form W-9, Request 3. Has no stockholders who can receive any your share of the cooperative's debt as debt in- for Taxpayer Identification Number and Certifi- distribution out of capital other than on a curred by you. The cooperative should deter- cation, can be used for this purpose. Failure to liquidation of the corporation. mine your share of its grandfathered debt, and meet any of these requirements may result in a its home acquisition debt. (Your share of each $50 penalty for each failure. The TIN can be ei- 4. Meets at least one of the following require- of these types of debt is equal to the average ther a social security number, an individual tax- ments. balance of each debt multiplied by the fraction payer identification number (issued by the IRS), a. Receives at least 80% of its gross in- just given.) After your share of the average bal- or an employer identification number. come for the year in which the mort- ance of each type of debt is determined, you in- gage interest is paid or incurred from clude it with the average balance of that type of If you can take a deduction for points that tenant-stockholders. For this purpose, debt secured by your stock. weren’t reported to you on Form 1098, deduct gross income is all income received Form 1098. The cooperative should give those points on Schedule A (Form 1040), during the entire year, including you a Form 1098 showing your share of the in- line 8c. amounts received before the corpora- terest. Use the rules in this publication to deter- tion changed to cooperative owner- mine your deductible mortgage interest. Deduct mortgage insurance premiums on ship. Schedule A (Form 1040), line 8d. b. At all times during the year, at least More than one borrower. If you and at least 80% of the total square footage of the Part II. Limits on Home one other person (other than your spouse if you corporation's property is used or avail- file a joint return) were liable for and paid inter- able for use by the tenant-stockhold- Mortgage Interest est on a mortgage that was for your home, and ers for residential or residential-rela- Deduction the other person received a Form 1098 showing ted use. the interest that was paid during the year, at- c. At least 90% of the corporation's ex- This part of the publication discusses the limits tach a statement to your paper return explaining penditures paid or incurred during the on deductible home mortgage interest. These this. Show how much of the interest each of you year are for the acquisition, construc- limits apply to your home mortgage interest ex- paid, and give the name and address of the per- tion, management, maintenance, or pense if you have a home mortgage that son who received the form. Deduct your share care of corporate property for the ben- doesn't fit into any of the three categories listed of the interest on Schedule A (Form 1040), efit of the tenant-stockholders. at the beginning of Part I under Fully deductible line 8b, and print “See attached” next to the line. interest, earlier. Also, deduct your share of any qualified mort- Stock used to secure debt. In some cases, gage insurance premiums on Schedule A (Form you can't use your cooperative housing stock to Your home mortgage interest deduction is 1040), line 8d. secure a debt because of either: limited to the interest on the part of your home Similarly, if you're the payer of record on a • Restrictions under local or state law, or mortgage debt that isn't more than your quali- mortgage on which there are other borrowers • Restrictions in the cooperative agreement fied loan limit. This is the part of your home entitled to a deduction for the interest shown on (other than restrictions in which the main mortgage debt that is grandfathered debt or that the Form 1098 you received, deduct only your purpose is to permit the tenant- isn't more than the limits for home acquisition share of the interest on Schedule A (Form stockholder to treat unsecured debt as se- debt. Table 1 can help you figure your qualified 1040), line 8a. Let each of the other borrowers cured debt). know what his or her share is.

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loan limit and your deductible home mortgage 1. You buy your home within 90 days before as within 30 days) after your application is ap- interest. or after the date you take out the mort- proved. If a timely application you make is re- gage. The home acquisition debt is limited jected, a reasonable additional time will be al- to the home's cost, plus the cost of any lowed to make a new application. Home Acquisition Debt substantial improvements within the limit described below in (2) or (3). (See Exam- Cost of home or improvements. To deter- Home acquisition debt is a mortgage you took ple 1, later.) mine your cost, include amounts paid to acquire out after October 13, 1987, to buy, build, or sub- any interest in a qualified home or to substan- 2. You build or substantially improve your stantially improve a qualified home (your main tially improve the home. home and take out the mortgage before or second home). It must also be secured by The cost of building or substantially improv- the work is completed. The home acquisi- that home. ing a qualified home includes the costs to ac- tion debt is limited to the amount of the ex- quire real property and building materials, fees penses incurred within 24 months before If the amount of your mortgage is more than for architects and design plans, and required the date of the mortgage. the cost of the home plus the cost of any sub- building permits. stantial improvements, only the debt that isn't 3. You build or substantially improve your more than the cost of the home plus substantial home and take out the mortgage within 90 Substantial improvement. An improve- improvements qualifies as home acquisition days after the work is completed. The ment is substantial if it: debt. home acquisition debt is limited to the • Adds to the value of your home, amount of the expenses incurred within • Prolongs your home's useful life, or Home acquisition debt limit. The total the period beginning 24 months before the • Adapts your home to new uses. amount you (or your spouse if married filing a work is completed and ending on the date Repairs that maintain your home in good joint return) can treat as home acquisition debt of the mortgage. (See Example 2, later.) condition, such as repainting your home, aren't on your main home and second home is limited substantial improvements. However, if you based on when the debt is secured. Example 1. You bought your main home on paint your home as part of a renovation that • For debt secured after October 13, 1987, June 3 for $175,000. You paid for the home with substantially improves your qualified home, you and prior to December 16, 2017, the limit is cash you got from the sale of your old home. On can include the painting costs in the cost of the $1 million ($500,000 if married filing sepa- July 15, you took out a mortgage of $150,000 improvements. rately). secured by your main home. You used the • For debt secured after December 15, $150,000 to invest in stocks. You can treat the Acquiring an interest in a home because 2017, the limit is $750,000 ($375,000 if mortgageEPS File as taken Name: out to buy 10426g01 your home be- of a divorce. IfSize: you incur Widthdebt to acquire = 14.0 the in- picas, Depth = 13.3 picas married filing separately). However, a tax- cause you bought the home within 90 days be- terest of a spouse or former spouse in a home payer who enters into a written binding fore you took out the mortgage. The entire mort- because of a divorce or legal separation, you contract before December 15, 2017, to gage qualifies as home acquisition debt can treat that debt as home acquisition debt. close on the purchase of a principal resi- because it wasn't more than the home's cost. dence before January 1, 2018, and who Part of home not a qualified home. To figure your home acquisition debt, you must di- purchases such residence before April 1, Example 2. On January 31, John began vide the cost of your home and improvements 2018, is considered to have incurred the building a home on the lot that he owned. He between the part of your home that is a qualified home acquisition debt prior to December used $45,000 of his personal funds to build the home and any part that isn't a qualified home. 16, 2017. home. The home was completed on October See Divided use of your home under Qualified 31. On November 21, John took out a $36,000 The limits above are reduced (but not below Home in Part I, earlier. zero) by the amount of your grandfathered debt mortgage that was secured by the home. The (discussed later). mortgage can be treated as used to build the home because it was taken out within 90 days Grandfathered Debt Refinanced home acquisition debt. Any se- after the home was completed. The entire mort- cured debt you use to refinance home acquisi- gage qualifies as home acquisition debt be- If you took out a mortgage on your home before tion debt is treated as home acquisition debt. cause it wasn't more than the expenses incur- October 14, 1987, or you refinanced such a However, the new debt will qualify as home ac- red within the period beginning 24 months mortgage, it may qualify as grandfathered debt. quisition debt only up to the amount of the bal- before the home was completed. This is illustra- To qualify, it must have been secured by your ance of the old mortgage principal just before ted by Figure C. qualified home on October 13, 1987, and at all times after that date. How you used the pro- the refinancing. Any additional debt not used to Figure C. buy, build, or substantially improve a qualified ceeds doesn't matter. home isn't home acquisition debt. Home Grandfathered debt isn't limited. All of the in- John Completed terest you paid on grandfathered debt is fully Starts ($45,000 in $36,000 Mortgage that qualifies later. A mortgage deductible home mortgage interest. However, Building Personal Mortgage that doesn't qualify as home acquisition debt the amount of your grandfathered debt reduces Home Funds Used) Taken Out because it doesn't meet all the requirements the limit for home acquisition debt. may qualify at a later time. For example, a debt ᮡ ᮡ ᮡ that you use to buy your home may not qualify Refinanced grandfathered debt. If you refi- Jan. 31 Oct. 31 Nov. 21 as home acquisition debt because it isn't se- nanced grandfathered debt after October 13, cured by the home. However, if the debt is later 1987, for an amount that wasn't more than the secured by the home, it may qualify as home mortgage principal left on the debt, then you still ᮢ ᮢ acquisition debt after that time. Similarly, a debt treat it as grandfathered debt. To the extent the that you use to buy property may not qualify be- 9 Months 22 Days new debt is more than that mortgage principal, cause the property isn't a qualified home. How- (Within 24 Months) (Within 90 Days) it is treated as home acquisition debt (so long ever, if the property later becomes a qualified as the proceeds were used to buy, build, or home, the debt may qualify after that time. Date of the mortgage. The date you take substantially improve the home), and the mort- out your mortgage is the day the loan proceeds gage is a mixed-use mortgage (discussed later Mortgage treated as used to buy, build, or under Average Mortgage Balance in the Ta- substantially improve home. A mortgage se- are disbursed. This is generally the closing date. You can treat the day you apply in writing ble 1 Instructions). The debt must be secured cured by a qualified home may be treated as by the qualified home. home acquisition debt, even if you don't actually for your mortgage as the date you take it out. You treat grandfathered debt that was refi- use the proceeds to buy, build, or substantially However, this applies only if you receive the nanced after October 13, 1987, as grandfath- improve the home. This applies in the following loan proceeds within a reasonable time (such ered debt only for the term left on the debt that situations. was refinanced. After that, you treat it as home

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acquisition debt to the extent that it was used to mortgage. The refinanced debt is treated as In either of those cases, you don't need Table 1. buy, build, or substantially improve the home. grandfathered debt for its entire term (30 years). Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home Exception. If the debt before refinancing mortgage interest. was like a balloon note (the principal on the Table 1 Instructions debt wasn't amortized over the term of the Fill out only one Table 1 for both your debt), then you treat the refinanced debt as You can deduct all of the interest you paid dur- TIP main and second home regardless of grandfathered debt for the term of the first refi- ing the year on mortgages secured by your how many mortgages you have. nancing. This term can't be more than 30 years. main home or second home in either of the fol- lowing two situations. Example. Chester took out a $200,000 first • All the mortgages are grandfathered debt. mortgage on his home in 1986. The mortgage • The total of the mortgage balances for the was a 5-year balloon note and the entire bal- entire year is within the limits discussed ance on the note was due in 1991. Chester refi- earlier under Home Acquisition Debt. nanced the debt in 1991 with a new 30-year

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Table 1. Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest for the Current Year

See the Table 1 Instructions. Keep for Your Records

Part I Qualified Loan Limit 1. Enter the average balance of all your grandfathered debt. See the line 1 instructions ...... 1.

2. Enter the average balance of all your home acquisition debt incurred after October 12, 1987 and prior to December 16, 2017. See the line 2 instructions ...... 2.

3. Enter $1,000,000 ($500,000 if married filing separately) ...... 3.

4. Enter the larger of the amount on line 1 or the amount on line 3 ...... 4.

5. Add the amounts on lines 1 and 2. Enter the total here ...... 5.

6. Enter the smaller of the amount on line 4 or the amount on line 5 ...... 6.

• If you have no home acquisition debt incurred after December 15, 2017, or the amount on line 6 is $750,000 ($375,000 if married filing separately) or more, line 6 is your qualified loan limit. Enter this amount on line 11 and go to Part II, line 12. • If you have home acquisition debt incurred after December 15, 2017, go to line 7. 7. Enter the average balance of all your home acquisition debt incurred after December 15, 2017. See the line 7 instructions ...... 7.

8. Enter $750,000 ($375,000 if married filing separately) ...... 8.

9. Enter the larger of the amount on line 6 or the amount on line 8 ...... 9.

10. Add the amounts on lines 6 and 7. Enter the total here ...... 10.

11. Enter the smaller of line 9 or line 10. This is your qualified loan limit ...... 11.

Part II Deductible Home Mortgage Interest 12. Enter the total of the average balances of all mortgages from lines 1, 2, and 7 on all qualified homes. See the line 12 instructions ...... 12.

• If line 11 is less than line 12, go on to line 13. • If line 11 is equal to or more than line 12, stop here. All of your interest on all the mortgages included on line 12 is deductible as home mortgage interest on Schedule A (Form 1040). 13. Enter the total amount of interest that you paid on the loans from line 12. See the line 13 instructions ...... 13.

14. Divide the amount on line 11 by the amount on line 12. Enter the result as a decimal amount (rounded to three places) ...... 14. × .

15. Multiply the amount on line 13 by the decimal amount on line 14. Enter the result. This is your deductible home mortgage interest. Enter this amount on Schedule A (Form 1040) ...... 15.

16. Subtract the amount on line 15 from the amount on line 13. Enter the result. This isn't home mortgage interest. See the line 16 instructions ...... 16.

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your home (home acquisition debt) and partly to 1. Enter the interest paid in 2020. buy a car (home equity debt). Average Mortgage Balance Don't include points, mortgage Complete lines 1, 2, and 7 of Table 1 by in- insurance premiums, or any cluding the separate average balances of any You have to figure the average balance of each interest paid in 2020 that is for a grandfathered debt and home acquisition debt mortgage to determine your qualified loan limit. year after 2020. However, do You need these amounts to complete lines 1, 2, (determined by the date the debt was acquired) include interest that is for 2020 7, and 12 of Table 1. You can use the highest in your mixed-use mortgage. Don’t use the but was paid in an earlier mortgage balances during the year, but you methods described earlier in this section to fig- year ...... may benefit most by using the average balan- ure the average balance of either category. In- ces. The following are methods you can use to 2. Enter the annual interest rate on stead, for each category, use the following figure your average mortgage balances. How- the mortgage. If the interest rate method. ever, if a mortgage has more than one category varied in 2020, use the lowest 1. Figure the balance of that category of debt of debt, see Mixed-use mortgages, later, in this rate for the year ...... for each month. This is the amount of the section. 3. Divide the amount on line 1 by loan proceeds allocated to that category, reduced by your principal payments on the the amount on line 2. Enter the Average of first and last balance method. mortgage previously applied to that cate- result ...... You can use this method if all the following ap- gory. Principal payments on a mixed-use ply. mortgage are applied in full to each cate- • You didn't borrow any new amounts on the Example. Mr. Blue had a mortgage se- gory of debt, until its balance is zero, in the mortgage during the year. (This doesn't in- cured by his main home all year. He paid inter- following order. clude borrowing the original mortgage est of $2,500 on this loan. The interest rate on amount.) the loan was 9% (0.09) all year. His average a. First, any home equity debt not used • You didn't prepay more than 1 month's balance using this method is $27,778, figured to buy, build, or substantially improve principal during the year. (This includes as follows. the home. prepayment by refinancing your home or b. Next, any grandfathered debt. by applying proceeds from its sale.) • You had to make level payments at fixed 1. Enter the interest paid in 2020. c. Finally, any home acquisition debt. Don’t include points, mortgage equal intervals on at least a semi-annual 2. Add together the monthly balances figured insurance premiums, or any basis. You treat your payments as level for b and c in (1). even if they were adjusted from time to interest paid in 2020 that is for time because of changes in the interest a year after 2020. However, Complete line 12 of Table 1 using the figure rate. do include interest that is for from line (2) above. To figure your average balance, com- 2020 but was paid in an earlier $2,500 Example 1. In 1986, Sharon took out a first plete the following worksheet. year ...... mortgage of $1,400,000. The mortgage was a 2. Enter the annual interest rate 5-year balloon note and the entire balance on on the mortgage. If the interest the note was due in 1991. She refinanced the 1. Enter the balance as of the first rate varied in 2020, use the debt in 1991 with a new 30-year mortgage 0.09 day of the year that the lowest rate for the year ...... (grandfathered debt). On March 2, 2020, when mortgage was secured by your 3. Divide the amount on line 1 by the home had a fair market value of $1,700,000 and she owed $500,000 on the mortgage, qualified home during the year the amount on line 2. Enter the Sharon took out a second mortgage for (generally, January 1) ...... result ...... $27,778 $200,000. She used $180,000 of the proceeds 2. Enter the balance as of the last to make substantial improvements to her home day of the year that the Statements provided by your lender. If you (home acquisition debt) and the remaining mortgage was secured by your receive monthly statements showing the closing $20,000 to buy a car (home equity debt). Under qualified home during the year balance or the average balance for the month, the loan agreement, Sharon must make princi- (generally, December 31) .... you can use either to figure your average bal- pal payments of $1,000 at the end of each ance for the year. You can treat the balance as month. During 2020, her principal payments on 3. Add amounts on lines 1 and zero for any month the mortgage wasn't se- the second mortgage totaled $10,000. 2 ...... cured by your qualified home. To complete Table 1, line 7, Sharon must 4. Divide the amount on line 3 by For each mortgage, figure your average bal- figure a separate average balance for the part 2.0. Enter the result ...... ance by adding your monthly closing or average of her second mortgage that is home acquisi- balances and dividing that total by the number tion debt. The January and February balances of months the home secured by that mortgage were zero. The March through December bal- Interest paid divided by interest rate was a qualified home during the year. ances were all $180,000 because none of her method. You can use this method if at all times If your lender can give you your average bal- principal payments are applied to the home ac- in 2020 the mortgage was secured by your ance for the year, you can use that amount. quisition debt. (They are all applied to the home qualified home and the interest was paid at equity debt, reducing it to $10,000 [$20,000 − least monthly. Example. Ms. Brown had a home loan se- $10,000].) The monthly balances of the home Complete the following worksheet to cured by her main home all year. She received acquisition debt total $1,800,000 ($180,000 × figure your average balance. monthly statements showing her average bal- 10). Therefore, the average balance of the ance for each month. She can figure her aver- home acquisition debt for 2020 was $150,000 age balance for the year by adding her monthly ($1,800,000 ÷ 12). average balances and dividing the total by 12. Example 2. The facts are the same as in Mixed-use mortgages. A mixed-use mort- Example 1. In 2021, Sharon's January through gage is a loan that consists of more than one of October principal payments on her second the three categories of debt (grandfathered mortgage are applied to the home equity debt, debt, home acquisition debt, and home equity reducing it to zero. The balance of the home ac- debt). For example, a mortgage you took out quisition debt remains $180,000 for each of during the year is a mixed-use mortgage if you those months. Because her November and De- used its proceeds partly to refinance a mort- cember principal payments are applied to the gage that you took out in an earlier year to buy home acquisition debt, the November balance

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is $179,000 ($180,000 − $1,000) and the De- Line 12 3. Subtract the result in item (2) from the cember balance is $178,000 ($180,000 − amount in item (1). This amount isn't de- $2,000). The monthly balances total $2,157,000 Figure the average balance for the current year ductible as home mortgage interest. How- [($180,000 × 10) + $179,000 + $178,000]. of each outstanding home mortgage. Add the ever, if you used any of the loan proceeds Therefore, the average balance of the home ac- average balances together and enter the total for business or investment activities, see quisition debt for 2021 is $179,750 ($2,157,000 on line 12. See Average Mortgage Balance, the instructions for line 16 next. ÷ 12). earlier. Claiming your deductible mortgage insur- Line 1 Note. If the average balance consists of ance premiums. If your adjusted gross in- more than one category of debt (grandfathered come on Form 1040 or 1040-SR, line 11, is Figure the average balance for the current year debt, home acquisition debt, and home equity more than $109,000 ($54,500 if married filing of each mortgage you had on all qualified debt), see Mixed-use mortgages, earlier, to fig- separately), you cannot deduct your mortgage homes on October 13, 1987 (grandfathered ure the average mortgage balance. insurance premiums. Otherwise, figure your de- debt). Add the results together and enter the to- ductible mortgage insurance premiums for the tal on line 1. Include the average balance for the Line 13 current year using the rules explained under current year for any grandfathered debt part of Mortgage Insurance Premiums in Part I. If the a mixed-use mortgage. If you make payments to a financial institution, amount on Form 1040 or 1040-SR, line 11, is or to a person whose business is making loans, $100,000 or less ($50,000 or less if married fil- ing separately), enter the full amount of your Line 2 you should get Form 1098 or a similar state- ment from the lender. This form will show the qualified mortgage insurance premiums on Schedule A (Form 1040), line 8d. If the amount Figure the average balance for the current year amount of interest to enter on line 13. Also, in- clude on this line any other interest payments on Form 1040 or 1040-SR, line 11, is more than of each mortgage you took out on all qualified $100,000 ($50,000 if married filing separately), homes after October 13, 1987, and prior to De- made on debts secured by a qualified home for which you didn't receive a Form 1098. Don't in- your deduction is limited. Enter your qualified cember 16, 2017, to buy, build, or substantially mortgage insurance premiums on line 1 of the improve the home (home acquisition debt). Add clude points or mortgage insurance premiums on this line. Mortgage Insurance Premiums Deduction the results together and enter the total on line 2. Worksheet in the Instructions for Schedule A Include the average balance for the current year Claiming your deductible points. Figure (Form 1040) to figure the amount to enter on for any home acquisition debt part of a Schedule A (Form 1040), line 8d. mixed-use mortgage. your deductible points as follows. 1. Figure your deductible points for the cur- Line 16 Line 7 rent year using the rules explained under Points in Part I, earlier. You can't deduct the amount of interest on Figure the average balance for the current year 2. Multiply the amount in item (1) by the deci- line 16 as home mortgage interest. If you didn't of each mortgage you took out on all qualified mal amount on line 14. Enter the result on use any of the proceeds of any mortgage inclu- homes after December 15, 2017, to buy, build, Schedule A (Form 1040), line 8a or 8c, ded on line 12 of the worksheet for business, in- or substantially improve the home (home ac- whichever applies. This amount is fully de- vestment, or other deductible activities, then all quisition debt). Add the results together and en- ductible. the interest on line 16 is personal interest. Per- ter the total on line 7. sonal interest isn't deductible.

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Table 2. Where To Deduct Your Interest Expense

IF you have ... THEN deduct it on ... AND for more information, go to ... deductible student loan interest Schedule 1 (Form 1040), line 20 Pub. 970, Tax Benefits for Education. deductible home mortgage interest Schedule A (Form 1040), line 8a this publication (936). and points reported on Form 1098 deductible home mortgage interest Schedule A (Form 1040), line 8b this publication (936). not reported on Form 1098 deductible points not reported on Schedule A (Form 1040), line 8c this publication (936). Form 1098 deductible mortgage insurance Schedule A (Form 1040), line 8d this publication (936). premiums deductible investment interest (other Schedule A (Form 1040), line 9 Pub. 550, Investment Income and than incurred to produce rents or Expenses. royalties) deductible business interest Schedule C (Form 1040) Pub. 535, Business Expenses. (non-farm) deductible farm business interest Schedule F (Form 1040) Pubs. 225, Farmer's Tax Guide, and 535, Business Expenses. deductible interest incurred to Schedule E (Form 1040) Pubs. 527, Residential Rental produce rents or royalties Property, and 535, Business Expenses. personal interest not deductible.

Mortgage A had an average balance of If you did use all or part of any mortgage $90,000, and mortgage B had an average bal- proceeds for business, investment, or other de- ance of $110,000. How To Get Tax Help ductible activities, the part of the interest on Don determines that the proceeds of mort- line 16 that is allocable to those activities can gage A are allocable to personal expenses for If you have questions about a tax issue, need be deducted as business, investment, or other the entire year. The proceeds of mortgage B help preparing your tax return, or want to down- deductible expense, subject to any limits that are allocable to his business for the entire year. load free publications, forms, or instructions, go apply. Table 2 shows where to deduct that in- Don paid $14,000 of interest on mortgage A to IRS.gov and find resources that can help you terest. See Allocation of Interest in chapter 4 of and $16,000 of interest on mortgage B. He fig- right away. Pub. 535 for an explanation of how to determine ures the amount of home mortgage interest he the use of loan proceeds. can deduct by using Table 1. Don determines Preparing and filing your tax return. After that $15,000 of the interest can be deducted as receiving all your wage and earnings state- The following two rules describe how to allo- home mortgage interest. ments (Form W-2, W-2G, 1099-R, 1099-MISC, cate the interest on line 16 to a business or in- The interest Don can allocate to his busi- 1099-NEC, etc.); unemployment compensation vestment activity. ness is the smaller of: statements (by mail or in a digital format) or If you used all of the proceeds of the mort- other government payment statements (Form • 1. The amount on Table 1, line 16, of the gages on line 12 for one activity, then all 1099-G); and interest, dividend, and retirement worksheet ($15,000); or the interest on line 16 is allocated to that statements from banks and investment firms activity. In this case, deduct the interest on 2. The total amount of interest allocable to (Forms 1099), you have several options to the form or schedule to which it applies. the business ($16,500), figured by multi- choose from to prepare and file your tax return. • If you used the proceeds of the mortgages plying the amount on line 13 (the $30,000 You can prepare the tax return yourself, see if on line 12 for more than one activity, then total interest paid) by the following frac- you qualify for free tax preparation, or hire a tax you can allocate the interest on line 16 tion. professional to prepare your return. among the activities in any manner you se- lect (up to the total amount of interest oth- $110,000 (the average balance Free options for tax preparation. Go to erwise allocable to each activity, explained of the mortgage allocated IRS.gov to see your options for preparing and next). to the business) filing your return online or in your local commun- ity, if you qualify, which include the following. $200,000 (the total average • Free File. This program lets you prepare You figure the total amount of interest other- balance of all mortgages) wise allocable to each activity by multiplying the and file your federal individual income tax return for free using brand-name tax-prep- amount on line 13 by the following fraction. Because $15,000 is the smaller of items (1) aration-and-filing software or Free File filla- and (2), that is the amount of interest Don can Amount on line 12 ble forms. However, state tax preparation allocate to his business. He deducts this allocated to that activity may not be available through Free File. Go amount on his Schedule C (Form 1040). Total amount on line 12 to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, Example. Don had two mortgages (A and and direct deposit or payment options. B) on his main home during the entire year.

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• VITA. The Volunteer Income Tax Assis- • IRS.gov/ITA: The Interactive Tax Assistant, Watching IRS videos. The IRS Video portal tance (VITA) program offers free tax help a tool that will ask you questions on a num- (IRSVideos.gov) contains video and audio pre- to people with low-to-moderate incomes, ber of tax law topics and provide answers. sentations for individuals, small businesses, persons with disabilities, and limited-Eng- • IRS.gov/Forms: Find forms, instructions, and tax professionals. lish-speaking taxpayers who need help and publications. You will find details on preparing their own tax returns. Go to 2020 tax changes and hundreds of interac- Online tax information in other languages. IRS.gov/VITA, download the free IRS2Go tive links to help you find answers to your You can find information on IRS.gov/ app, or call 800-906-9887 for information questions. MyLanguage if English isn’t your native lan- on free tax return preparation. • You may also be able to access tax law in- guage. • TCE. The Tax Counseling for the Elderly formation in your electronic filing software. (TCE) program offers free tax help for all Free interpreter service. Multilingual assis- taxpayers, particularly those who are 60 tance, provided by the IRS, is available at Tax- years of age and older. TCE volunteers Need someone to prepare your tax return? payer Assistance Centers (TACs) and other specialize in answering questions about There are various types of tax return preparers, IRS offices. Over-the-phone interpreter service pensions and retirement-related issues including tax preparers, enrolled agents, certi- is accessible in more than 350 languages. unique to seniors. Go to IRS.gov/TCE, fied public accountants (CPAs), attorneys, and download the free IRS2Go app, or call many others who don’t have professional cre- Getting tax forms and publications. Go to 888-227-7669 for information on free tax dentials. If you choose to have someone pre- IRS.gov/Forms to view, download, or print all of return preparation. pare your tax return, choose that preparer the forms, instructions, and publications you • MilTax. Members of the U.S. Armed wisely. A paid tax preparer is: may need. You can also download and view Forces and qualified veterans may use Mil- • Primarily responsible for the overall sub- popular tax publications and instructions (in- Tax, a free tax service offered by the De- stantive accuracy of your return, cluding the Instructions for Forms 1040 and partment of Defense through Military One- • Required to sign the return, and 1040-SR) on mobile devices as an eBook at Source. • Required to include their preparer tax iden- IRS.gov/eBooks. Or you can go to IRS.gov/ Also, the IRS offers Free Fillable tification number (PTIN). OrderForms to place an order. Forms, which can be completed online and Although the tax preparer always signs the then filed electronically regardless of in- Access your online account (individual tax- return, you're ultimately responsible for provid- come. payers only). Go to IRS.gov/Account to se- ing all the information required for the preparer curely access information about your federal tax to accurately prepare your return. Anyone paid Using online tools to help prepare your re- account. to prepare tax returns for others should have a turn. Go to IRS.gov/Tools for the following. • View the amount you owe, pay online, or thorough understanding of tax matters. For The Earned Income Tax Credit Assistant set up an online payment agreement. • more information on how to choose a tax pre- (IRS.gov/EITCAssistant) determines if • Access your tax records online. parer, go to Tips for Choosing a Tax Preparer you’re eligible for the earned income credit • Review your payment history. on IRS.gov. (EIC). • Go to IRS.gov/SecureAccess to review the required identity authentication process. • The Online EIN Application (IRS.gov/EIN) Coronavirus. Go to IRS.gov/Coronavirus for helps you get an employer identification links to information on the impact of the corona- Using direct deposit. The fastest way to re- number (EIN). virus, as well as tax relief available for individu- • The Tax Withholding Estimator (IRS.gov/ ceive a tax refund is to file electronically and als and families, small and large businesses, choose direct deposit, which securely and elec- W4app) makes it easier for everyone to and tax-exempt organizations. pay the correct amount of tax during the tronically transfers your refund directly into your financial account. Direct deposit also avoids the year. The tool is a convenient, online way Tax reform. Tax reform legislation affects indi- possibility that your check could be lost, stolen, to check and tailor your withholding. It’s viduals, businesses, and tax-exempt and gov- or returned undeliverable to the IRS. Eight in 10 more user-friendly for taxpayers, including ernment entities. Go to IRS.gov/TaxReform for taxpayers use direct deposit to receive their re- retirees and self-employed individuals. The information and updates on how this legislation funds. The IRS issues more than 90% of re- features include the following. affects your taxes. – Easy to understand language. funds in less than 21 days. – The ability to switch between screens, Employers can register to use Business Getting a transcript of your return. The correct previous entries, and skip Services Online. The Social Security Adminis- quickest way to get a copy of your tax transcript screens that don’t apply. tration (SSA) offers online service at SSA.gov/ is to go to IRS.gov/Transcripts. Click on either – Tips and links to help you determine if employer for fast, free, and secure online W-2 “Get Transcript Online” or “Get Transcript by you qualify for tax credits and deduc- filing options to CPAs, accountants, enrolled Mail” to order a free copy of your transcript. If tions. agents, and individuals who process Form W-2, you prefer, you can order your transcript by call- – A progress tracker. Wage and Tax Statement, and Form W-2c, ing 800-908-9946. – A self-employment tax feature. Corrected Wage and Tax Statement. – Automatic calculation of taxable social Reporting and resolving your tax-related security benefits. IRS social media. Go to IRS.gov/SocialMedia identity theft issues. to see the various social media tools the IRS • The First Time Homebuyer Credit Account • Tax-related identity theft happens when uses to share the latest information on tax Look-up (IRS.gov/HomeBuyer) tool pro- someone steals your personal information changes, scam alerts, initiatives, products, and vides information on your repayments and to commit tax fraud. Your taxes can be af- services. At the IRS, privacy and security are account balance. fected if your SSN is used to file a fraudu- paramount. We use these tools to share public • The Sales Tax Deduction Calculator lent return or to claim a refund or credit. (IRS.gov/SalesTax) figures the amount you information with you. Don’t post your SSN or can claim if you itemize deductions on other confidential information on social media • The IRS doesn’t initiate contact with tax- Schedule A (Form 1040). sites. Always protect your identity when using payers by email, text messages, telephone any social networking site. calls, or social media channels to request Getting answers to your tax ques- The following IRS YouTube channels pro- personal or financial information. This in- tions. On IRS.gov, you can get vide short, informative videos on various tax-re- cludes requests for personal identification up-to-date information on current lated topics in English, Spanish, and ASL. numbers (PINs), passwords, or similar in- events and changes in tax law. • Youtube.com/irsvideos. formation for credit cards, banks, or other • IRS.gov/Help: A variety of tools to help you • Youtube.com/irsvideosmultilingua. financial accounts. get answers to some of the most common • Youtube.com/irsvideosASL. • Go to IRS.gov/IdentityTheft, the IRS Iden- tax questions. tity Theft Central webpage, for information on identity theft and data security

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protection for taxpayers, tax professionals, in monthly installments if you can’t pay What Can TAS Do For You? and businesses. If your SSN has been lost your taxes in full today. Once you complete or stolen or you suspect you’re a victim of the online process, you will receive imme- TAS can help you resolve problems that you tax-related identity theft, you can learn diate notification of whether your agree- can’t resolve with the IRS. And their service is what steps you should take. ment has been approved. free. If you qualify for their assistance, you will • Get an Identity Protection PIN (IP PIN). IP • Use the Offer in Compromise Pre-Qualifier be assigned to one advocate who will work with PINs are six-digit numbers assigned to eli- to see if you can settle your tax debt for you throughout the process and will do every- gible taxpayers to help prevent the misuse less than the full amount you owe. For thing possible to resolve your issue. TAS can of their SSNs on fraudulent federal income more information on the Offer in Compro- help you if: tax returns. When you have an IP PIN, it mise program, go to IRS.gov/OIC. • Your problem is causing financial difficulty prevents someone else from filing a tax re- for you, your family, or your business; turn with your SSN. To learn more, go to Filing an amended return. You can now file • You face (or your business is facing) an IRS.gov/IPPIN. Form 1040-X electronically with tax filing soft- immediate threat of adverse action; or ware to amend 2020 Forms 1040 and 1040-SR. • You’ve tried repeatedly to contact the IRS Checking on the status of your refund. To do so, you must have e-filed your original but no one has responded, or the IRS • Go to IRS.gov/Refunds. 2020 return. Amended returns for all prior years hasn’t responded by the date promised. • The IRS can’t issue refunds before must be mailed. See Tips for taxpayers who mid-February 2021 for returns that claimed need to file an amended tax return and go to How Can You Reach TAS? the EIC or the additional child tax credit IRS.gov/Form1040X for information and up- (ACTC). This applies to the entire refund, dates. TAS has offices in every state, the District of not just the portion associated with these Columbia, and Puerto Rico. Your local advo- credits. Checking the status of your amended re- cate’s number is in your local directory and at • Download the official IRS2Go app to your turn. Go to IRS.gov/WMAR to track the status TaxpayerAdvocate.IRS.gov/Contact-Us. You mobile device to check your refund status. of Form 1040-X amended returns. Please note can also call them at 877-777-4778. • Call the automated refund hotline at that it can take up to 3 weeks from the date you 800-829-1954. filed your amended return for it to show up in our system, and processing it can take up to 16 How Else Does TAS Help Making a tax payment. The IRS uses the lat- weeks. Taxpayers? est encryption technology to ensure your elec- tronic payments are safe and secure. You can Understanding an IRS notice or letter TAS works to resolve large-scale problems that make electronic payments online, by phone, you’ve received. Go to IRS.gov/Notices to affect many taxpayers. If you know of one of and from a mobile device using the IRS2Go find additional information about responding to these broad issues, please report it to them at app. Paying electronically is quick, easy, and an IRS notice or letter. IRS.gov/SAMS. faster than mailing in a check or money order. Go to IRS.gov/Payments for information on how Contacting your local IRS office. Keep in TAS for Tax Professionals to make a payment using any of the following mind, many questions can be answered on options. IRS.gov without visiting an IRS Taxpayer Assis- TAS can provide a variety of information for tax • IRS Direct Pay: Pay your individual tax bill tance Center (TAC). Go to IRS.gov/LetUsHelp professionals, including tax law updates and or estimated tax payment directly from for the topics people ask about most. If you still guidance, TAS programs, and ways to let TAS your checking or savings account at no need help, IRS TACs provide tax help when a know about systemic problems you’ve seen in cost to you. tax issue can’t be handled online or by phone. your practice. • Debit or Credit Card: Choose an approved All TACs now provide service by appointment, payment processor to pay online, by so you’ll know in advance that you can get the Low Income Taxpayer phone, or by mobile device. service you need without long wait times. Be- • Electronic Funds Withdrawal: Offered only fore you visit, go to IRS.gov/TACLocator to find Clinics (LITCs) when filing your federal taxes using tax re- the nearest TAC and to check hours, available turn preparation software or through a tax services, and appointment options. Or, on the LITCs are independent from the IRS. LITCs professional. IRS2Go app, under the Stay Connected tab, represent individuals whose income is below a • Electronic Federal Tax Payment System: choose the Contact Us option and click on “Lo- certain level and need to resolve tax problems Best option for businesses. Enrollment is cal Offices.” with the IRS, such as audits, appeals, and tax required. collection disputes. In addition, clinics can pro- • Check or Money Order: Mail your payment The Taxpayer Advocate vide information about taxpayer rights and re- to the address listed on the notice or in- sponsibilities in different languages for individu- structions. Service (TAS) Is Here To als who speak English as a second language. • Cash: You may be able to pay your taxes Help You Services are offered for free or a small fee for eligible taxpayers. To find a clinic near you, visit with cash at a participating retail store. What Is TAS? • Same-Day Wire: You may be able to do www.TaxpayerAdvocate.IRS.gov/about-us/ same-day wire from your financial institu- Low-Income-Taxpayer-Clinics-LITC/ or see IRS TAS is an independent organization within the Pub. 4134, Low Income Taxpayer Clinic List. tion. Contact your financial institution for IRS that helps taxpayers and protects taxpayer availability, cost, and cut-off times. rights. Their job is to ensure that every taxpayer is treated fairly and that you know and under- What if I can’t pay now? Go to IRS.gov/ stand your rights under the Taxpayer Bill of Payments for more information about your op- Rights. tions. • Apply for an online payment agreement (IRS.gov/OPA) to meet your tax obligation

To help us develop a more useful index, please let us know if you have ideas for index entries. Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Publication 936 (2020) Page 17 Page 18 of 18 Fileid: … tions/P936/2020/A/XML/Cycle04/source 13:09 - 1-Mar-2021

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Ground rents 5 Mixed-use mortgages 13 Qualified loan limit: A Mortgage Insurance Premiums 8 Average mortgage balance 13 Acquisition debt 2, 10 Mortgage interest 2 Worksheet to figure (Table 1) 12 Alimony 5 H Cooperative housing 9 Amortization: Hardest Hit Fund Program 5 Credit 5 Points 7 Home 2 Fully deductible interest 2 R Appraisal fees 7 Acquisition debt 2, 10 Home mortgage interest 2, 5 Redeemable ground rents 5 Armed forces: Construction 4 How to report 9 Refinancing 7 Housing allowance 5 Cost of 10 Late payment charges 4 Grandfathered debt 10 Assistance (See Tax help) Destroyed 4 Limits on deduction 9 Home acquisition debt 10 Average mortgage balance 13 Divided use 4, 10 Ministers' and military housing Refunds 5, 8 Grandfathered debt 2, 10 allowance 5 Rent: Improvement loan, points 7 Prepaid interest 5, 8 Nonredeemable ground rents 5 B Main 4 Prepayment penalty 4 Redeemable ground rents 5 Borrowers: Office in 4 Refunds 5, 8 Rental payments 5 More than one 9 Qualified 4 Sale of home 4 Renting of home: Seller-paid points, treatment by Renting out part of 4 Special situations 4 Part of 4 buyer 8 Sale of 4 Statement 8 Time-sharing arrangements 4 Business: Second 4 Where to deduct 15 Repairs 10 Average mortgage balance, total Time-sharing arrangements 4 Worksheet to figure (Table 1) 12 Reverse Mortgages 5 amount of interest otherwise Housing allowance: Mortgage Interest Statement 8 allowable to each activity 14 Ministers and military 5 Mortgages: Mortgage proceeds used for 9 Assistance payments (under S sec. 235 of National Housing Sale of home 4 I Act) 5 Second home 4, 7 C Improvements: Average balance 13 Secured debt 3 Clergy: Cost of 10 Date of 10 Seller-paid points 7 Ministers' and military housing Home acquisition debt 10 Ending early 8 Separated taxpayers 5 allowance 5 Points 7 Late qualifying 10 Separate returns 4 Cooperative housing 4, 9 Substantial 10 Mixed-use 13 Share of Interest 9 Cost of home or Interest 2 Preparation costs for note or Special Method 5 improvements 10 (See also Mortgage interest) deed of trust 7 Spouses 4 Credits 5 Interest rate method 13 Proceeds invested in tax-exempt Statements provided by Refunded 5, 8 securities 5 lender 13 Where to deduct 15 Proceeds used for business 9 Stock: D Investments: Proceeds used for investment 9 Cooperative housing 9 Qualified loan limit 12, 13 Date of mortgage 10 Average mortgage balance and Refinanced 7, 10 Debt: total amount of interest Reverse 5 Choice to treat as not secured by allowable 14 T Statements provided by home 4 Mortgage proceeds used for 5, Tables and figures: lender 13 Grandfathered 2, 10 9 Deductible home mortgage To buy, build, or improve 10 Home acquisition 2, 10 interest: Wraparound 3 Not secured by home 3 Fully deductible, Secured 3 J determination of (Figure Deductions 2, 5 Joint returns 4 A) 2 Home office 4 N How to figure (Table 1) 12 Points 7, 14 Nonredeemable ground rents 5 Mortgage to buy, build, or Deed preparation costs 7 L Notary fees 7 improve home (Figure C) 10 Divorced taxpayers 5, 10 Lender mortgage statements 13 Points (Figure B) 5 Limits: Qualified loan limit worksheet Cooperative housing, mortgage O (Table 1) 12 E interest deduction 9 Office in home 4 Tax credits 5 Emergency Homeowners' Loan Deductibility of mortgage Tax-exempt securities: Program 5 insurance premiums 8 Mortgage proceeds invested Deductibility of points 8 P in 5 Home acquisition debt 10 Penalties: Tax help 15 F Home mortgage interest Mortgage prepayment 4 Time-sharing arrangements 4 Fees: deduction 9 Points 5–8 Appraisal 7 Qualified loan limit 12, 13 Claiming deductible 14 Notaries 7 Line 10 9 Exception to general rule 7 W Points (See Points) Loans 9, 10 Excess 8 Worksheets: Figures (See Tables and figures) (See also Mortgages) Funds provided less than 8 Deductible home mortgage Form 1040, Schedule A 9, 15 Home improvement, points 7 General rule 7 interest 12 Form 1040, Schedule C or Qualified loan limit 12 Home improvement loans 7 Qualified loan limit 12 C-EZ 15 Seller paid 7 Wraparound mortgages 3 Form 1040, Schedule E 15 Prepaid interest 5, 8 Form 1040, Schedule F 15 M Prepayment penalties 4 Form 1098 8 Main home 4 Publications (See Tax help) Form 8396 5 Married taxpayers 4 Military housing allowance 5 Ministers' housing allowance 5 Q G Missing children, photographs Qualified homes 4 Grandfathered debt 2, 10 of 1

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