J.K. Lasser's Your Income Tax 2022

CHAPTER 15Itemized Deduction for Interest Expenses

On Schedule A (Form 1040 or 1040-SR), you may deduct three types of interest charges:

• Interest on qualifying home acquisition loans (15.2) and home equity loans that qualify as home acquisition loans (15.3)
• Points (15.7)
• Investment interest, but only up to the amount of net investment income (15.9).

Premiums paid in 2021 for qualified mortgage insurance on a principal or second residence are deductible as interest but the deduction will not be allowed after 2021 unless Congress extends the law authorizing the deduction (15.5).

Interest on personal loans (such as loans to buy autos and other personal items and credit card finance charges) is not deductible with the exception of qualifying student loan interest; see Chapter 33.

Interest on loans for business purposes is fully deductible on Schedule C. Interest on loans related to rental property is fully deductible from rental income on Schedule E. Whether interest is a business, investment, or a personal expense generally depends upon the use made of the money borrowed, not on the kind of property used to secure the loan. However, interest on a loan secured by a first or second home may be deductible as home equity mortgage interest regardless of the way you use the loan.

Interest on a loan used to finance an investment in a passive activity is subject to the limitations discussed in  Chapter 10. However, if you rent out a second home that qualifies as a second residence, ...