Qualified student loan interest and business interest are deductible before adjusted gross income (AGI, above the line), qualified residence interest
and investment interest are deductible from AGI (below the line), and personal interest is not deductible.
163(h)(3)(E) treatment of mortgage insurance premiums as qualified residence interest
The below list is not at all intended to include all of the extenders but highlights some that might be of interest: Mortgage insurance premiums treated as qualified residence interest
; Continuation of the exclusion from gross income for the discharge of qualified principal residence debt; The ability to continue to take an above the line deduction for qualified tuition and related qualifying expenses; Continuation of empowerment zone tax incentives; Continuation of nonresidential energy property credit(actually extended through 2021); Continuation of credit for nonbusiness energy property; Continued credit for qualified new fuel cell motor vehicles; and A complete list of the extenders is included in (P.L.115-123) Bipartisan Budget Act.
These amounts continue to be treated as qualified residence interest
under another extension (IRC section 163), but the deduction phases out for taxpayers with AGI from $100,000 to $109,000 for joint filers (half these amounts for married taxpayers filing separately).
Extension of mortgage insurance premiums treated as qualified residence interest
. The provision would extend through 2014 the treatment of qualified mortgageinsurance premiums as interest for purposes of the mortgage interest deduction.
For 2013, the provision allowing the discharge of a qualified principal residence debt to be excluded from income (up to $2 million) is available, as is the provision allowing mortgage insurance premiums to be deducted as qualified residence interest
. The latter provision was also retroactively reinstated for 2012.
Special rules limit the deduction of personal interest (see Q 7923), qualified residence interest
(see Q 7924), investment interest (see Q 7925), student loan interest (see Q 7930) and interest subject to the passive loss rules (see Q 7913, Q 7914).
For example, investment interest is generally deductible only to the extent of investment income, qualified residence interest
is generally deductible in full, trade or business interest is generally deductible as a business expense, and personal interest is not deductible at all (except student loan interest; see page 378).
the total amount of acquisition debt that can give rise to qualified residence interest
is $1 million ...
You even can finance the acquisition of additional land, adjacent to your home, and deduct the interest as qualified residence interest
. You also can deduct the interest you pay to buy a second residence or vacation home.
Mortgage interest must meet the definition of qualified residence interest
For the interest on the borrowed funds to qualify as qualified residence interest
, the debt instrument must state that the residence serves as security for the debt and the instrument must be properly recorded under state law.