Yes, you can deduct the interest $$ amounts from both MORTGAGE loans, but Please Understand that it's NOT YOUR Choice of Figures to use on SCHEDULE A ITEMIZED DEDUCTIONs bec your MTG PAYMENTS made consists of various components: principal, intersts, taxes, home owner's insurance etc and both MORTGAGE companies will be sending you I think IRS Form 1098? that are required annual statements identifying specific INTERESTS PAID, TAXES PAID that you would list or insert into the Tax Software...
By the way, I will check and get back but I think you may also be able to deduct DICOUNT POINTS or maybe they are pro-rata? as it's been awhile since I last refinanced (done twice on 2 different homes) but my Dad was Tax Practitioner with 250 clients
As long as you meet all of the qualifications on ownership, you can deduct the interest on a second mortgage providing you are able to itemize your deductions.
This year being 2008 means the new loan is not eligible until next filing. The old loan is deductible.
Yes you should have received 1098's for both loans and you sum the interest together on line 10 of Schedule A.
I refinanced in early 2005 and got separate 1098's even though old and new loans were from the same lender, although, slightly different types of loans.
I have not paid attention how to specifically handle points (prepaying interest, like a prepayment penalty), because I have never paid them.
A loan taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts may qualify as home equity debt. The interest would be deducted on Form 1040, Schedule A, Itemized Deductions. The amount you can deduct as interest on home equity debt is subject to certain limitations. For more information, refer to Publication 936, Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.
Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). It also must be secured by that home.
If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. The additional debt may qualify as home equity debt
Home acquisition debt limit. The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Debt over this limit may qualify as home equity debt
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