Is mortgage interest deductible if....

Forum|Forum|4 years ago
January 26, 2022
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I took out a fully new mortgage for my primary home (so it is fully cash-out). With the proceeds, I purchased a second home. Is the interest deductible?

Or must the loan be secured by the second home to be deductible?

DawnC

Employee

The loan must be secured by the second home. For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.

If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.

Examples of common ways you might have used this money not on your home include:

Making a downpayment on a different home
Funding improvements on a different home
Making a payment on a different loan or debt
Having miscellaneous large purchases

Under these provisions, if you want to deduct interest on a second home, you must have a mortgage on it. If you borrowed against the equity on your first home to finance the purchase of your second home, you can't deduct the interest. 😞

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