Publication 936 - Home Mortgage Interest Deduction - Department Of Treasury

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

Enter the average balance of all your grandfathered debt. See line 1 instructions . . .

Enter the average balance of all your home acquisition debt. See line 2 instructions

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

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

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

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

Enter $100,000 ($50,000 if married filing separately).

See the line 7 instructions for a limit that may apply . . . . . . . . . . . . . . . . . . . . . . . . .

Add the amounts on lines 6 and 7. Enter the total. This is your qualified loan limit . .

Part II

Deductible Home Mortgage Interest

Enter the total of the average balances of all mortgages on all qualified homes.

See line 9 instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

•

If line 8 is less than line 9, go on to line 10.

•

If line 8 is equal to or more than line 9, stop here. All of your interest

on all the mortgages included on line 9 is deductible as home mortgage

interest on Schedule A (Form 1040).

10. Enter the total amount of interest that you paid. See line 10 instructions . . . . . . . . . . . 10.

11. Divide the amount on line 8 by the amount on line 9.

× .

Enter the result as a decimal amount (rounded to three places) . . . . . . . . . . . . . . . . . 11.

12. Multiply the amount on line 10 by the decimal amount on line 11.

Enter the result. This is your deductible home mortgage interest.

Enter this amount on Schedule A (Form 1040) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

13. Subtract the amount on line 12 from the amount on line 10. Enter the result.

This is not home mortgage interest. See line 13 instructions . . . . . . . . . . . . . . . . . . . . 13.

mortgage previously applied to that cate-

Example 1. In 1986, Sharon took out a

were all $180,000, because none of her princi-

gory. Principal payments on a mixed-use

pal payments are applied to the home acquisi-

$1,400,000 mortgage to buy her main home

mortgage are applied in full to each cate-

tion debt. (They are all applied to the home

(grandfathered debt). On March 2, 2008, when

equity debt, reducing it to $10,000 [$20,000 −

gory of debt, until its balance is zero, in the

the home had a fair market value of $1,700,000

following order:

$10,000].) The monthly balances of the home

and she owed $1,100,000 on the mortgage,

acquisition debt total $1,800,000 ($180,000 ×

Sharon took out a second mortgage for

a. First, any home equity debt,

10). Therefore, the average balance of the home

$200,000. She used $180,000 of the proceeds

acquisition debt for 2008 was $150,000

b. Next, any grandfathered debt, and

to make substantial improvements to her home

($1,800,000 ÷ 12).

c. Finally, any home acquisition debt.

(home acquisition debt) and the remaining

$20,000 to buy a car (home equity debt). Under

Example 2. The facts are the same as in

2. Add together the monthly balances figured

Example 1. In 2009, Sharon’s January through

the loan agreement, Sharon must make princi-

in (1).

October principal payments on her second mort-

pal payments of $1,000 at the end of each

gage are applied to the home equity debt, reduc-

month. During 2008, her principal payments on

3. Divide the result in (2) by 12.

ing it to zero. The balance of the home

the second mortgage totaled $10,000.

Complete line 9 of Table 1 by including the

acquisition debt remains $180,000 for each of

To complete Table 1, line 2, Sharon must

average balance of the entire mixed-use mort-

those months. Because her November and De-

gage, figured under one of the methods de-

figure a separate average balance for the part of

cember principal payments are applied to the

scribed earlier in this section.

her second mortgage that is home acquisition

home acquisition debt, the November balance is

debt. The January and February balances were

$179,000 ($180,000 − $1,000) and the Decem-

ber balance is $178,000 ($180,000 − $2,000).

zero. The March through December balances

Publication 936 (2008)

Page 11

Publication 936 - Home Mortgage Interest Deduction - Department Of Treasury - 2008 Page 11

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