Standard Deduction and Mortgage Interest

The standard deduction is an amount that you can deduct from your federal taxable income if you don't itemize your deductions. If you do itemize your deductions, you can't take the standard deduction, but you can deduct qualified home mortgage interest. If either the home mortgage interest deduction or the total of your entire itemized deductions exceed the amount of your standard deduction, you will save money by itemizing your deductions and waiving the standard deduction.

The Standard Deduction

The amount of your standard deduction depends on your filing status. The IRS recognizes several filing statuses: single, married and filing separately, married and filing jointly, head of household, qualifying widow/widower and dependent. For the 2012 tax year, the lowest standard deduction is $5,950 for single taxpayers, while the highest is $11,900 for both married taxpayers filing jointly and qualifying widows and widowers. These amounts are increased annually.

Home Mortgages

The home mortgage interest deduction does not apply to investment property. To qualify for the deduction, the home that secures the mortgage must be either your primary residence or a secondary residence such as a vacation home. If you rent out your second home, you can take the home mortgage interest deduction only if you live there 15 or more days a year, or more than 10 percent of the time you rent out the home, whichever is greater. For example, if you rent out the home 180 days a year, you must live there yourself at least 18 days a year to deduct the mortgage interest you pay on that home.

Deductible Interest

If you are repaying your mortgage loan in installment payments, your lender should have provided you with a form that tells you how much of each payment is applied against loan interest. You may deduct all of the interest portion for the tax year in which you paid it. You may deduct loan origination fees and other initial payments that you made to get the loan on a gradual basis over the life of the loan. You can deduct all of your home mortgage interest only if the value of the mortgage was no more than $1 million during the entire tax year ($500,000 if you are married and filing separately).


If you paid more than $600 in mortgage loan interest to your lender during the tax year, your lender is required to send you Form 1098, which lists the home mortgage interest that you paid. You don't need to send Form 1098 to the IRS, but you can use it to figure your deduction and keep it in case of an IRS audit. If you paid no more than $600 in mortgage loan interest to a single lender, you will have to rely on your own records to figure the deduction. Report your deduction on Schedule A (the tax form for itemized deductions) and Form 1040.