Publication 936

Cat. No. 10426G Contents

Home
What’s New .................. 1
Department
of the Reminders . . . . . . . . . . . . . . . . . . . 1

Mortgage
Treasury
Internal Introduction . . . . . . . . . . . . . . . . . . 2
Revenue

Interest
Service Part I. Home Mortgage Interest . . . . . . 2
Secured Debt . . . . . . . . . . . . . . . 3
Qualified Home . . . . . . . . . . . . . . 4

Deduction Special Situations . . . . . .

Points . . . . . . . . . . . . .
Form 1098, Mortgage Interest
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4
5

Statement . . . . . . . . . ...... 8
How To Report . . . . . . . . ...... 8
Special Rule for
For use in preparing Tenant-Stockholders in

2018 Returns
Cooperative Housing
Corporations . . . . . . . ...... 8
Part II. Limits on Home Mortgage
Interest Deduction . . . . . . . .... 9
Home Acquisition Debt . . . . . .... 9
Grandfathered Debt . . . . . . . . . . 10
Worksheet To Figure Your
Qualified Loan Limit and
Deductible Home Mortgage
Interest For the Current Year . . . 11

How To Get Tax Help . . . . . . . . . . . 14

Index . . . . . . . . . . . . . . . . . . . . . 16

What’s New
Mortgage insurance premiums. The item-
ized deduction for mortgage insurance premi-
ums expired on December 31, 2017.
At the time this publication went to
! print, Congress was considering legis-
CAUTION lation to extend the itemized deduction

for mortgage insurance premiums. To find out if

this legislation was enacted, and for more de-
tails, go to IRS.gov/Extenders.
Home equity loan interest. No matter when
the indebtedness was incurred, you can no lon-
ger deduct the interest from a loan secured by
your home to the extent the loan proceeds
weren't used to buy, build, or substantially im-
prove your home.
Home mortgage interest. You can deduct
home mortgage interest on the first $750,000
($375,000 if married filing separately) of indebt-
edness. However, higher limitations ($1 million
($500,000 if married filing separately)) apply if
you are deducting mortgage interest from in-
debtedness incurred before December 16,
2017.

Reminders
Future developments. For the latest informa-
Get forms and other information faster and easier at: tion about developments related to Pub. 936,
• IRS.gov (English) • IRS.gov/Korean (한국어) such as legislation enacted after it was pub-
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) lished, go to IRS.gov/Pub936.
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) Photographs of missing children. The IRS is
a proud partner with the National Center for

Dec 31, 2018

Missing & Exploited Children® (NCMEC). Pho- 527 Residential Rental Property
527 category.) If one or more of your mortgages
tographs of missing children selected by the doesn’t fit into any of these categories, use Part
530 Tax Information for Homeowners
Center may appear in this publication on pages II of this publication to figure the amount of in-
530

that would otherwise be blank. You can help 535 Business Expenses
535

terest you can deduct.

bring these children home by looking at the The three categories are as follows.
photographs and calling 1-800-THE-LOST See How To Get Tax Help near the end of this
(1-800-843-5678) if you recognize a child. 1. Mortgages you took out on or before Octo-
publication for information about getting these
ber 13, 1987 (called grandfathered debt).
publications.
Introduction 2. Mortgages you (or your spouse if married
filing a joint return) took out after October
This publication discusses the rules for deduct- Part I. Home 13, 1987, and prior to December 16, 2017
ing home mortgage interest.
Part I contains general information on home Mortgage Interest (see binding contract exception below), to
buy, build, or substantially improve your
mortgage interest, including points. It also ex- home (called home acquisition debt), but
plains how to report deductible interest on your This part explains what you can deduct as only if throughout 2018 these mortgages
tax return. home mortgage interest. It includes discussions plus any grandfathered debt totaled $1
Part II explains how your deduction for home on points and how to report deductible interest million or less ($500,000 or less if married
mortgage interest may be limited. It contains on your tax return. filing separately).
Table 1, which is a worksheet you can use to Exception. A taxpayer who enters into
Generally, home mortgage interest is any in-
figure the limit on your deduction. a written binding contract before Decem-
terest you pay on a loan secured by your home
ber 15, 2017, to close on the purchase of
(main home or a second home). The loan may
Comments and suggestions. We welcome a principal residence before January 1,
be a mortgage to buy your home, or a second
your comments about this publication and your 2018, and who purchases such residence
mortgage.
suggestions for future editions. before April 1, 2018, is considered to have
You can send us comments through You can deduct home mortgage interest if incurred the home acquisition debt prior to
IRS.gov/FormComments. Or you can write to: all the following conditions are met. December 16, 2017.
• You file Form 1040 and itemize deductions 3. Mortgages you (or your spouse if married
Internal Revenue Service on Schedule A (Form 1040).
filing a joint return) took out after Decem-
Tax Forms and Publications • The mortgage is a secured debt on a quali- ber 15, 2017, to buy, build, or substantially
1111 Constitution Ave. NW, IR-6526 fied home in which you have an ownership
improve your home (called home acquisi-
Washington, DC 20224 interest. Secured Debt and Qualified
tion debt), but only if throughout 2018
Home are explained later.
these mortgages plus any grandfathered
Although we can’t respond individually to Both you and the lender must intend that the debt totaled $750,000 or less ($375,000 or
each comment received, we do appreciate your loan be repaid. less if married filing separately).
feedback and will consider your comments as
we revise our tax forms, instructions, and publi- Note. Interest on home equity loans and The dollar limits for the second and third cate-
cations. lines of credit are deductible only if the bor- gories apply to the combined mortgages on
rowed funds are used to buy, build, or substan- your main home and second home.
Ordering forms and publications. Visit tially improve the taxpayer’s home that secures See Part II for more detailed definitions of
IRS.gov/FormsPubs to download forms and the loan. As under prior law, the loan must be grandfathered debt and home acquisition debt.
publications. Otherwise, you can go to IRS.gov/ secured by the taxpayer’s main home or sec- You can use Figure A to check whether your
OrderForms to order current and prior-year ond home (qualified residence), not exceed the home mortgage interest is fully deductible.
forms and instructions. Your order should arrive cost of the home, and meet other requirements.
within 10 business days.
Tax questions. If you have a tax question Fully deductible interest. In most cases, you
not answered by this publication, check can deduct all of your home mortgage interest.
IRS.gov and How To Get Tax Help at the end of How much you can deduct depends on the date
this publication. of the mortgage, the amount of the mortgage,
and how you use the mortgage proceeds.
If all of your mortgages fit into one or more of
Useful Items the following three categories at all times during
You may want to see:
the year, you can deduct all of the interest on
those mortgages. (If any one mortgage fits into
Publication more than one category, add the debt that fits in
523 Selling Your Home
523 each category to your other debt in the same

Page 2 Publication 936 (2018)

 Figure A. Is My Home Mortgage Interest Fully Deductible?
(Instructions: Include balances of ALL mortgages secured by your main home and second home.)

Start Here:

Do you meet the conditions1 to deduct home You can’t deduct the interest payments as home
No mortgage interest. 2
mortgage interest?

Yes

Yes
Were all of your home mortgages taken out Your home mortgage interest is fully deductible. You
on or before October 13, 1987? don’t need to read Part II of this publication.

No

Were all of your home mortgages taken out after

October 13, 1987, used to buy, build, or substantially No Go to Part II of this publication to determine the
improve the main home secured by that main home limits on your deductible home mortgage interest.
mortgage or used to buy, build, or substantially
improve the second home secured by that second
home mortgage, or both?

Yes

Were your (or your spouse’s if married filing a joint Were your (or your spouse’s if married filing a joint
return) mortgage balances $750,000 or less return) grandfathered debt plus home acquisition
($375,000 or less if married filing separately) No debt balances $750,000 or less4 ($375,000 or less if No
(or $1 million or less ($500,000 if married filing married filing separately) (or $1 million or less
separately) if all debt was incurred prior to ($500,000 if married filing separately) if all debt was
December 16, 2017) at all times during the year? 3 incurred prior to December 16, 2017) at all times
during the year? 3
Yes
Yes

1 You must itemize deductions on Schedule A (Form 1040). The loan must be a secured debt on a qualified home. See Part I, Home Mortgage Interest, earlier.
2 See Table 2 in Part II of this publication for where to deduct other types of interest payments.
3 A taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018,
and who purchases such residence before April 1, 2018, is considered to have incurred the home acquisition debt prior to December 16, 2017, and may use
the 2017 threshold amounts of $1,000,000 ($500,000 for married filing separately).
4
See Part II of this publication for more information about grandfathered debt and home acquisition debt.

Secured Debt • Is recorded or is otherwise perfected under cause of a lien on your general assets or if it is a
any state or local law that applies. security interest that attaches to the property
You can deduct your home mortgage interest without your consent (such as a mechanic's lien
In other words, your mortgage is a secured
only if your mortgage is a secured debt. A se- or judgment lien).
debt if you put your home up as collateral to
cured debt is one in which you sign an instru- A debt isn’t secured by your home if it once
protect the interests of the lender. If you can't
ment (such as a mortgage, deed of trust, or was, but is no longer secured by your home.
pay the debt, your home can then serve as pay-
land contract) that: ment to the lender to satisfy (pay) the debt. In Wraparound mortgage. This isn’t a se-
• Makes your ownership in a qualified home this publication, mortgage will refer to secured cured debt unless it is recorded or otherwise
security for payment of the debt; debt. perfected under state law.
• Provides, in case of default, that your
home could satisfy the debt; and Debt not secured by home. A debt isn’t se-
cured by your home if it is secured solely be-

Publication 936 (2018) Page 3

 Example. Beth owns a home subject to a home. For information on residential rental You can continue treating a destroyed home
mortgage of $40,000. She sells the home for property, see Pub. 527. as a qualified home if, within a reasonable pe-
$100,000 to John, who takes it subject to the riod of time after the home is destroyed, you:
$40,000 mortgage. Beth continues to make the More than one second home. If you have • Rebuild the destroyed home and move into
payments on the $40,000 note. John pays more than one second home, you can treat only it, or
$10,000 down and gives Beth a $90,000 note one as the qualified second home during any • Sell the land on which the home was loca-
secured by a wraparound mortgage on the year. However, you can change the home you ted.
home. Beth doesn't record or otherwise perfect treat as a second home during the year in the
following situations. This rule applies to your main home and to a
the $90,000 mortgage under the state law that
• If you get a new home during the year, you second home that you treat as a qualified
applies. Therefore, the mortgage isn't a secured
can choose to treat the new home as your home.
debt and John can't deduct any of the interest
he pays on it as home mortgage interest. second home as of the day you buy it.
• If your main home no longer qualifies as Time-sharing arrangements. You can treat a
your main home, you can choose to treat it home you own under a time-sharing plan as a
Choice to treat the debt as not secured by
as your second home as of the day you qualified home if it meets all the requirements.
your home. You can choose to treat any debt
stop using it as your main home. A time-sharing plan is an arrangement between
secured by your qualified home as not secured
• If your second home is sold during the year two or more people that limits each person's in-
by the home. This treatment begins with the tax
or becomes your main home, you can terest in the home or right to use it to a certain
year for which you make the choice and contin-
choose a new second home as of the day part of the year.
ues for all later tax years. You can revoke your
choice only with the consent of the IRS. you sell the old one or begin using it as Rental of time-share. If you rent out your
your main home. time-share, it qualifies as a second home only if
You may want to treat a debt as not secured
by your home if the interest on that debt is fully you also use it as a home during the year. See
Divided use of your home. The only part of
deductible (for example, as a business ex- Second home rented out, earlier, for the use re-
your home that is considered a qualified home
pense) whether or not it qualifies as home mort- quirement. To know whether you meet that re-
is the part you use for residential living. If you
gage interest. This may allow you, if the limits in quirement, count your days of use and rental of
use part of your home for other than residential
Part II apply, more of a deduction for interest on the home only during the time you have a right
living, such as a home office, you must allocate
other debts that are deductible only as home to use it or to receive any benefits from the
the use of your home. You must then divide
mortgage interest. rental of it.
both the cost and fair market value of your
home between the part that is a qualified home Married taxpayers. If you're married and file a
Cooperative apartment owner. If you own
and the part that isn't. Dividing the cost may af- joint return, your qualified home(s) can be
stock in a cooperative housing corporation, see
fect the amount of your home acquisition debt, owned either jointly or by only one spouse.
the Special Rule for Tenant-Stockholders in Co-
which is limited to the cost of your home plus
operative Housing Corporations near the end of
the cost of any improvements. (See Home Ac- Separate returns. If you're married filing
this Part I.
quisition Debt in Part II, later.) separately and you and your spouse own more
than one home, you can each take into account
Qualified Home Renting out part of home. If you rent out only one home as a qualified home. However, if
part of a qualified home to another person (ten- you both consent in writing, then one spouse
ant), you can treat the rented part as being used can take both the main home and a second
For you to take a home mortgage interest de- by you for residential living only if all of the fol- home into account.
duction, your debt must be secured by a quali- lowing conditions apply.
fied home. This means your main home or your
• The rented part of your home is used by
second home. A home includes a house, con- the tenant primarily for residential living. Special Situations
dominium, cooperative, mobile home, house
• The rented part of your home isn't a
trailer, boat, or similar property that has sleep- self-contained residential unit having sepa- This section describes certain items that can be
ing, cooking, and toilet facilities. rate sleeping, cooking, and toilet facilities. included as home mortgage interest and others
The interest you pay on a mortgage on a
• You don't rent (directly or by sublease) the that can't. It also describes certain special situa-
same or different parts of your home to tions that may affect your deduction.
home other than your main or second home
more than two tenants at any time during
may be deductible if the proceeds of the loan
the tax year. If two persons (and depend- Late payment charge on mortgage pay-
were used for business, investment, or other
ents of either) share the same sleeping ment. You can deduct as home mortgage in-
deductible purposes. Otherwise, it is consid-
quarters, they are treated as one tenant. terest a late payment charge if it wasn't for a
ered personal interest and isn't deductible.
specific service performed in connection with
Office in home. If you have an office in
Main home. You can have only one main your mortgage loan.
your home that you use in your business, see
home at any one time. This is the home where Pub. 587, Business Use of Your Home. It ex- Mortgage prepayment penalty. If you pay off
you ordinarily live most of the time. plains how to figure your deduction for the busi- your home mortgage early, you may have to
ness use of your home, which includes the busi-
Second home. A second home is a home that pay a penalty. You can deduct that penalty as
ness part of your home mortgage interest.
you choose to treat as your second home. home mortgage interest provided the penalty
isn't for a specific service performed or cost in-
Home under construction. You can treat a
Second home not rented out. If you have curred in connection with your mortgage loan.
home under construction as a qualified home
a second home that you don’t hold out for rent
for a period of up to 24 months, but only if it be-
or resale to others at any time during the year, Sale of home. If you sell your home, you can
comes your qualified home at the time it is
you can treat it as a qualified home. You don't deduct your home mortgage interest (subject to
ready for occupancy.
have to use the home during the year. any limits that apply) paid up to, but not includ-
The 24-month period can start any time on ing, the date of the sale.
Second home rented out. If you have a or after the day construction begins.
second home and rent it out part of the year, Example. John and Peggy Harris sold their
you also must use it as a home during the year Home destroyed. You may be able to con- home on May 7. Through April 30, they made
for it to be a qualified home. You must use this tinue treating your home as a qualified home home mortgage interest payments of $1,220.
home more than 14 days or more than 10% of even after it is destroyed in a fire, storm, tor- The settlement sheet for the sale of the home
the number of days during the year that the nado, earthquake, or other casualty. This showed $50 interest for the 6-day period in May
home is rented at a fair rental, whichever is lon- means you can continue to deduct the interest up to, but not including, the date of sale. Their
ger. If you don't use the home long enough, it is you pay on your home mortgage, subject to the mortgage interest deduction is $1,270 ($1,220
considered rental property and not a second limits described in this publication. + $50).

Page 4 Publication 936 (2018)

Prepaid interest. If you pay interest in ad- Mortgage assistance payments under sec- Rental payments. If you live in a house before
vance for a period that goes beyond the end of tion 235 of the National Housing Act. If you final settlement on the purchase, any payments
the tax year, you must spread this interest over qualify for mortgage assistance payments for you make for that period are rent and not inter-
the tax years to which it applies. You can de- lower-income families under section 235 of the est. This is true even if the settlement papers
duct in each year only the interest that qualifies National Housing Act, part or all of the interest call them interest. You can't deduct these pay-
as home mortgage interest for that year. How- on your mortgage may be paid for you. You ments as home mortgage interest.
ever, there is an exception that applies to can't deduct the interest that is paid for you.
points, discussed later. Mortgage proceeds invested in tax-exempt
No other effect on taxes. Don’t include securities. You can't deduct the home mort-
Mortgage interest credit. You may be able to these mortgage assistance payments in your in- gage interest on grandfathered debt if you used
claim a mortgage interest credit if you were is- come. Also, don't use these payments to re- the proceeds of the mortgage to buy securities
sued a mortgage credit certificate (MCC) by a duce other deductions, such as real estate or certificates that produce tax-free income.
state or local government. Figure the credit on taxes. “Grandfathered debt” is defined in Part II of this
Form 8396, Mortgage Interest Credit. If you publication.
take this credit, you must reduce your mortgage Divorced or separated individuals. If a di-
interest deduction by the amount of the credit. vorce or separation agreement requires you or Refunds of interest. If you receive a refund of
your spouse or former spouse to pay home interest in the same tax year you paid it, you
See Form 8396 and Pub. 530 for more infor-
mortgage interest on a home owned by both of must reduce your interest expense by the
mation on the mortgage interest credit.
you, the payment of interest may be alimony. amount refunded to you. If you receive a refund
See the discussion of Payments for of interest you deducted in an earlier year, you
Ministers' and military housing allowance.
jointly-owned home under Alimony in Pub. 504, generally must include the refund in income in
If you're a minister or a member of the uni-
Divorced or Separated Individuals. the year you receive it. However, you need to
formed services and receive a housing allow-
ance that isn't taxable, you can still deduct your include it only up to the amount of the deduction
Redeemable ground rents. In some states that reduced your tax in the earlier year. This is
home mortgage interest.
(such as Maryland), you can buy your home true whether the interest overcharge was refun-
subject to a ground rent. A ground rent is an ob- ded to you or was used to reduce the outstand-
Hardest Hit Fund and Emergency Home-
ligation you assume to pay a fixed amount per ing principal on your mortgage. If you need to
owners' Loan Programs. You can use a spe-
year on the property. Under this arrangement, include the refund in income, report it on
cial method to figure your deduction for mort-
you're leasing (rather than buying) the land on Schedule 1 (Form 1040), line 21.
gage interest and real estate taxes on your
which your home is located.
main home if you meet the following two condi- If you received a refund of interest you over-
tions. If you make annual or periodic rental pay- paid in an earlier year, you generally will receive
ments on a redeemable ground rent, you can a Form 1098, Mortgage Interest Statement,
1. You received assistance under: deduct them as mortgage interest. showing the refund in box 4. For information
a. A State Housing Finance Agency A ground rent is a redeemable ground rent if about Form 1098, see Form 1098, Mortgage In-
(State HFA) Hardest Hit Fund pro- all of the following are true. terest Statement, later.
gram in which program payments • Your lease, including renewal periods, is For more information on how to treat refunds
could be used to pay mortgage inter- for more than 15 years. of interest deducted in earlier years, see Recov-
est, or • You can freely assign the lease. eries in Pub. 525, Taxable and Nontaxable In-
• You have a present or future right (under come.
b. An Emergency Homeowners' Loan
state or local law) to end the lease and buy
Program administered by the Depart-
the lessor's entire interest in the land by Cooperative apartment owner. If you
ment of Housing and Urban Develop-
paying a specific amount. own a cooperative apartment, you must reduce
ment (HUD) or a state.
• The lessor's interest in the land is primarily your home mortgage interest deduction by your
2. You meet the rules to deduct all of the a security interest to protect the rental pay- share of any cash portion of a patronage divi-
mortgage interest on your loan and all of ments to which he or she is entitled. dend that the cooperative receives. The patron-
the real estate taxes on your main home. age dividend is a partial refund to the coopera-
Payments made to end the lease and to buy
tive housing corporation of mortgage interest if
If you meet these conditions, then you can de- the lessor's entire interest in the land aren't de-
paid in a prior year.
duct all of the payments you actually made dur- ductible as mortgage interest.
If you receive a Form 1098 from the cooper-
ing the year to your mortgage servicer, the Nonredeemable ground rents. Payments ative housing corporation, the form should show
State HFA, or HUD on the home mortgage (in- on a nonredeemable ground rent aren't mort- only the amount you can deduct.
cluding the amount shown in box 3 of Form gage interest. You can deduct them as rent if
1098-MA, Mortgage Assistance Payments), but they are a business expense or if they are for SBA disaster home loans. Interest paid on
not more than the sum of the amounts shown rental property. disaster home loans from the Small Business
on Form 1098, Mortgage Interest Statement, in Administration (SBA) is deductible as mortgage
box 1 (mortgage interest received from Reverse mortgages. A reverse mortgage is a interest if the requirements discussed earlier
payer(s)/borrower(s)) and box 10 (real property loan where the lender pays you (in a lump sum, under Home Mortgage Interest are met.
taxes). You may first allocate amounts paid to a monthly advance, a line of credit, or a combi-
mortgage interest up to the amount shown on
Form 1098. You may then use any reasonable
nation of all three) while you continue to live in
your home. With a reverse mortgage, you retain
Points
method to allocate the remaining balance of the title to your home. Depending on the plan, your
payments to real property taxes, mortgage in- The term “points” is used to describe certain
reverse mortgage becomes due with interest
surance premiums, and principal. Regardless of charges paid, or treated as paid, by a borrower
when you move, sell your home, reach the end
how you determine the deductible amount un- to obtain a home mortgage. Points may also be
of a pre-selected loan period, or die. Because
der this special safe harbor method, any called loan origination fees, maximum loan
reverse mortgages are considered loan advan-
amount allocated to state or local property charges, loan discount, or discount points.
ces and not income, the amount you receive
taxes is subject to the limitation on the deduc- isn't taxable. Any interest (including original is-
tion for state and local taxes. However, you're sue discount) accrued on a reverse mortgage is
not required to use this special method to figure considered home equity debt and isn’t deducti-
your deduction for mortgage interest and real ble.
estate taxes on your main home.

Publication 936 (2018) Page 5

 Figure B. Are My Points Fully Deductible This Year?

Start Here:

No
Is the loan secured by your main home?

Yes

Is the payment of points an established No

business practice in your area?

Yes

Were the points paid more than the Yes

amount generally charged in your area?

No

Do you use the cash method of No

accounting?

Yes

Were the points paid in place of Yes

amounts that ordinarily are separately
stated on the settlement sheet?

No

Were the funds you provided (other than

those you borrowed from your lender or No
mortgage broker), plus any points the
seller paid, at least as much as the points
charged?*

Yes

Yes Did you take out the loan to substantially

improve your main home?

No

Did you take out the loan to buy or build No

your main home?

Yes

Were the points figured as a percentage No

of the principal amount of the mortgage?

Yes

Is the amount paid clearly shown as No

points on the settlement statement?

Yes

You can fully deduct the points this year You cannot fully deduct the points this
on Schedule A (Form 1040). year. See the discussion on Points,
earlier.

* The funds you provided are not required to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other
funds you paid at or before closing for any purpose.

Page 6 Publication 936 (2018)

 A borrower is treated as paying any points 2. Paying points is an established business points ($3,000). Two points ($2,000) were for
that a home seller pays for the borrower's mort- practice in the area where the loan was prepaid interest, and one point ($1,000) was
gage. See Points paid by the seller, later. made. charged for services, in place of amounts that
ordinarily are stated separately on the settle-
3. The points paid weren't more than the
General Rule ment statement. Bill paid the points out of his
points generally charged in that area.
private funds, rather than out of the proceeds of
You generally can't deduct the full amount of 4. You use the cash method of accounting. the new loan. The payment of points is an es-
points in the year paid. Because they are pre- This means you report income in the year tablished practice in the area, and the points
paid interest, you generally deduct them ratably you receive it and deduct expenses in the charged aren't more than the amount generally
over the life (term) of the mortgage. See Deduc- year you pay them. Most individuals use charged there. Bill's first payment on the new
tion Allowed Ratably next. If the loan is a home this method. loan was due July 1. He made six payments on
equity, line of credit, or credit card loan and the the loan in 2018 and is a cash basis taxpayer.
5. The points weren't paid in place of
proceeds from the loan are not used to buy, Bill used the funds from the new mortgage
amounts that ordinarily are stated sepa-
build, or substantially improve the home, the to repay his existing mortgage. Although the
rately on the settlement statement, such
points are not deductible. new mortgage loan was for Bill's continued
as appraisal fees, inspection fees, title
ownership of his main home, it wasn't for the
fees, attorney fees, and property taxes.
For exceptions to the general rule, see De- purchase or substantial improvement of that
duction Allowed in Year Paid, later. 6. The funds you provided at or before clos- home. He can't deduct all of the points in 2018.
ing, plus any points the seller paid, were at He can deduct two points ($2,000) ratably over
least as much as the points charged. The the life of the loan. He deducts $67 [($2,000 ÷
Deduction Allowed Ratably funds you provided aren't required to have 180 months) × 6 payments] of the points in
been applied to the points. They can in- 2018. The other point ($1,000) was a fee for
If you don't meet the tests listed under Deduc-
clude a down payment, an escrow de- services and isn't deductible.
tion Allowed in Year Paid, later, the loan isn't a
posit, earnest money, and other funds you
home improvement loan, or you choose not to
paid at or before closing for any purpose. Example 2. The facts are the same as in
deduct your points in full in the year paid, you
You can't have borrowed these funds from Example 1, except that Bill used $25,000 of the
can deduct the points ratably (equally) over the
your lender or mortgage broker. loan proceeds to substantially improve his
life of the loan if you meet all of the following
home and $75,000 to repay his existing mort-
tests. 7. You use your loan to buy or build your gage. Bill deducts 25% ($25,000 ÷ $100,000) of
main home. the points ($2,000) in 2018. His deduction is
1. You use the cash method of accounting.
This means you report income in the year 8. The points were figured as a percentage $500 ($2,000 × 25% (0.25)).
you receive it and deduct expenses in the of the principal amount of the mortgage. Bill also deducts the ratable part of the re-
year you pay them. Most individuals use maining $1,500 ($2,000 − $500) that must be
9. The amount is clearly shown on the settle- spread over the life of the loan. This is $50
this method.
ment statement (such as the Settlement [($1,500 ÷ 180 months) × 6 payments] in 2018.
2. Your loan is secured by a home. (The Statement, Form HUD-1) as points The total amount Bill deducts in 2018 is $550
home doesn't need to be your main charged for the mortgage. The points may ($500 + $50).
home.) be shown as paid from either your funds or
the seller's.
3. Your loan period isn't more than 30 years. Special Situations
4. If your loan period is more than 10 years, Note. If you meet all of these tests, you can
the terms of your loan are the same as choose to either fully deduct the points in the This section describes certain special situations
other loans offered in your area for the year paid, or deduct them over the life of the that may affect your deduction of points.
same or longer period. loan.
Original issue discount. If you don't qualify to
5. Either your loan amount is $250,000 or either deduct the points in the year paid or de-
Home improvement loan. You can also fully
less, or the number of points isn't more duct them ratably over the life of the loan, or if
deduct in the year paid points paid on a loan to
than: you choose not to use either of these methods,
substantially improve your main home if tests
a. 4, if your loan period is 15 years or (1) through (6) are met. the points reduce the issue price of the loan.
less; or This reduction results in original issue discount,
Second home. You can't fully deduct which is discussed in chapter 4 of Pub. 535.
b. 6, if your loan period is more than 15 ! in the year paid points you pay on
years. CAUTION loans secured by your second home. Amounts charged for services. Amounts
You can deduct these points only over the life of charged by the lender for specific services con-
Example. You use the cash method of ac- the loan. nected to the loan aren't interest. Examples of
counting. In 2018, you took out a $100,000 these charges are:
home mortgage loan payable over 20 years. Refinancing. Generally, points you pay to refi- • Appraisal fees,
The terms of the loan are the same as for other nance a mortgage aren't deductible in full in the • Department of Veterans Affairs (VA) fund-
20-year loans offered in your area. You paid year you pay them. This is true even if the new ing fees,
$4,800 in points. You made 3 monthly pay- mortgage is secured by your main home. • Mortgage insurance premiums,
ments on the loan in 2018. You can deduct $60
However, if you use part of the refinanced • Notary fees, and
[($4,800 ÷ 240 months) x 3 payments] in 2018.
mortgage proceeds to substantially improve • Preparation costs for the mortgage note or
In 2019, if you make all twelve payments, you deed of trust.
your main home and you meet the first six tests
will be able to deduct $240 ($20 x 12).
listed under Deduction Allowed in Year Paid, You can't deduct these amounts as points ei-
earlier, you can fully deduct the part of the ther in the year paid or over the life of the mort-
Deduction Allowed in Year Paid points related to the improvement in the year gage.
you paid them with your own funds. You can
You can fully deduct points in the year paid if deduct the rest of the points over the life of the Points paid by the seller. The term “points”
you meet all the following tests. (You can use loan. includes loan placement fees that the seller
Figure B as a quick guide to see whether your pays to the lender to arrange financing for the
points are fully deductible in the year paid.) Example 1. In 1998, Bill Fields got a mort- buyer.
1. Your loan is secured by your main home. gage to buy a home. In 2018, Bill refinanced
that mortgage with a 15-year $100,000 mort- Treatment by seller. The seller can't de-
(Your main home is the one you ordinarily duct these fees as interest. But they are a sell-
live in most of the time.) gage loan. The mortgage is secured by his
home. To get the new loan, he had to pay three ing expense that reduces the amount realized

Publication 936 (2018) Page 7

by the seller. See Pub. 523 for information on Form 1098. The mortgage interest statement buy, build, or substantially improve a qualified
selling your home. you receive should show not only the total inter- home. If you paid more deductible interest to
est paid during the year, but also your deducti- the financial institution than the amount shown
Treatment by buyer. The buyer reduces ble points paid during the year. See Form 1098, on Form 1098, show the portion of the deducti-
the basis of the home by the amount of the Mortgage Interest Statement next. ble interest that was omitted from Form 1098 on
seller-paid points and treats the points as if he line 8b. Attach a statement to your paper return
or she had paid them. If all the tests under De- explaining the difference and print “See at-
duction Allowed in Year Paid, earlier, are met, Form 1098, Mortgage tached” next to line 8b.
the buyer can deduct the points in the year Interest Statement
paid. If any of those tests aren't met, the buyer Deduct home mortgage interest that wasn't
deducts the points over the life of the loan. If you paid $600 or more of mortgage interest reported to you on Form 1098 on Schedule A
If you need information about the basis of (including certain points) during the year on any (Form 1040), line 8b. If you paid home mort-
your home, see Pub. 523 or Pub. 530. one mortgage, you generally will receive a Form gage interest to the person from whom you
1098 or a similar statement from the mortgage bought your home, show that person's name,
Funds provided are less than points. If you holder. You will receive the statement if you pay address, and taxpayer identification number
meet all the tests in Deduction Allowed in Year interest to a person (including a financial institu- (TIN) on the dotted lines next to line 8b. The
Paid, earlier, except that the funds you provided tion or cooperative housing corporation) in the seller must give you this number and you must
were less than the points charged to you (test course of that person's trade or business. A give the seller your TIN. A Form W-9, Request
(6)), you can deduct the points in the year paid, governmental unit is a person for purposes of for Taxpayer Identification Number and Certifi-
up to the amount of funds you provided. In addi- furnishing the statement. cation, can be used for this purpose. Failure to
tion, you can deduct any points paid by the meet any of these requirements may result in a
seller. The statement for each year should be sent $50 penalty for each failure. The TIN can be ei-
to you by January 31 of the following year. A ther a social security number, an individual tax-
Example 1. When you took out a $100,000 copy of this form will also be sent to the IRS. payer identification number (issued by the IRS),
mortgage loan to buy your home in December, or an employer identification number.
you were charged one point ($1,000). You meet The statement will show the total interest
all the tests for deducting points in the year you paid during the year, and if you purchased
a principal residence during the year, it also will If you can take a deduction for points that
paid, except the only funds you provided were a weren’t reported to you on Form 1098, deduct
$750 down payment. Of the $1,000 charged for show the points paid during the year, including
seller-paid points, that are deductible as inter- those points on Schedule A (Form 1040),
points, you can deduct $750 in the year paid. line 8c.
You spread the remaining $250 over the life of est to the extent you do not exceed the home
the mortgage. acquisition debt limit. See Part II, Limits on
More than one borrower. If you and at least
Home Mortgage Interest Deduction, later. How-
one other person (other than your spouse if you
Example 2. The facts are the same as in ever, the statement shouldn't show any interest
file a joint return) were liable for and paid inter-
Example 1, except that the person who sold you that was paid for you by a government agency.
est on a mortgage that was for your home, and
your home also paid one point ($1,000) to help the other person received a Form 1098 showing
As a general rule, Form 1098 will include
you get your mortgage. In the year paid, you the interest that was paid during the year, at-
only points that you can fully deduct in the year
can deduct $1,750 ($750 of the amount you tach a statement to your paper return explaining
paid. However, it may report points that you
were charged plus the $1,000 paid by the this. Show how much of the interest each of you
can't deduct, particularly if you are filing married
seller). You spread the remaining $250 over the paid, and give the name and address of the per-
filing separately or have mortgages for multiple
life of the mortgage. You must reduce the basis son who received the form. Deduct your share
properties. You must take care to deduct only
of your home by the $1,000 paid by the seller. of the interest on Schedule A (Form 1040),
those points legally allowable. Additionally, cer-
tain points not included on Form 1098 also may line 8b, and print “See attached” next to the line.
Excess points. If you meet all the tests in De-
be deductible, either in the year paid or over the Similarly, if you're the payer of record on a
duction Allowed in Year Paid, earlier, except
life of the loan. See the earlier discussion of mortgage on which there are other borrowers
that the points paid were more than generally
Points to determine whether you can deduct entitled to a deduction for the interest shown on
paid in your area (test (3)), you deduct in the
points not shown on Form 1098. the Form 1098 you received, deduct only your
year paid only the points that are generally
share of the interest on Schedule A (Form
charged. You must spread any additional points
Prepaid interest on Form 1098. If you pre- 1040), line 8a. Let each of the other borrowers
over the life of the mortgage.
paid interest in 2018 that accrued in full by Jan- know what his or her share is.
uary 15, 2019, this prepaid interest may be in-
Mortgage ending early. If you spread your
cluded in box 1 of Form 1098. However, you Mortgage proceeds used for business or in-
deduction for points over the life of the mort-
can't deduct the prepaid amount for January vestment. If your home mortgage interest de-
gage, you can deduct any remaining balance in
2019 in 2018. (See Prepaid interest, earlier.) duction is limited under the rules explained in
the year the mortgage ends. However, if you re-
You will have to figure the interest that accrued Part II, but all or part of the mortgage proceeds
finance the mortgage with the same lender, you
for 2019 and subtract it from the amount in were used for business, investment, or other
can't deduct any remaining balance of spread
box 1. You will include the interest for January deductible activities, see Table 2 near the end
points. Instead, deduct the remaining balance
2019 with other interest you pay for 2019. of this publication. It shows where to deduct the
over the term of the new loan.
part of your excess interest that is for those ac-
A mortgage may end early due to a prepay- Refunded interest. If you received a refund of tivities. The Table 1 Instructions for line 16 in
ment, refinancing, foreclosure, or similar event. mortgage interest you overpaid in an earlier Part II explain how to divide the excess interest
year, you generally will receive a Form 1098 among the activities for which the mortgage
Example. Dan paid $3,000 in points in
showing the refund in box 4. See Refunds of in- proceeds were used.
2007 that he had to spread out over the 15-year
terest, earlier.
life of the mortgage. He deducts $200 points
per year. Through 2018, Dan has deducted Special Rule for
$2,200 of the points. How To Report Tenant-Stockholders in
Dan prepaid his mortgage in full in 2018. He
can deduct the remaining $800 of points in Generally, you can deduct the home mortgage
Cooperative Housing
2018. interest and points reported to you on Form Corporations
1098 on Schedule A (Form 1040), line 8a. How-
Limits on deduction. You can't fully deduct ever, any interest showing in box 1 of Form A qualified home includes stock in a coopera-
points paid on a mortgage that exceeds the lim- 1098 from a home equity loan, or a line of credit tive housing corporation owned by a ten-
its discussed in Part II. See the Table 1 Instruc- or credit card loan secured by the property is ant-stockholder. This applies only if the ten-
tions, later, for line 13. not deductible if the proceeds were not used to ant-stockholder is entitled to live in the house or

Page 8 Publication 936 (2018)

apartment because of owning stock in the co- Limits on deduction. To figure how the 2018, is considered to have incurred the
operative. limits discussed in Part II apply to you, treat home acquisition debt prior to December
your share of the cooperative's debt as debt in- 16, 2017.
Cooperative housing corporation. This is a curred by you. The cooperative should deter- The limits above are reduced (but not below
corporation that meets all of the following condi- mine your share of its grandfathered debt, and zero) by the amount of your grandfathered debt
tions. its home acquisition debt. (Your share of each (discussed later).
of these types of debt is equal to the average
1. Has only one class of stock outstanding.
balance of each debt multiplied by the fraction Refinanced home acquisition debt. Any se-
2. Has no stockholders other than those that just given.) After your share of the average bal- cured debt you use to refinance home acquisi-
own the stock who can live in a house, ance of each type of debt is determined, you in- tion debt is treated as home acquisition debt.
apartment, or house trailer owned or clude it with the average balance of that type of However, the new debt will qualify as home ac-
leased by the corporation. debt secured by your stock. quisition debt only up to the amount of the bal-
3. Has no stockholders who can receive any Form 1098. The cooperative should give ance of the old mortgage principal just before
distribution out of capital other than on a you a Form 1098 showing your share of the in- the refinancing. Any additional debt not used to
liquidation of the corporation. terest. Use the rules in this publication to deter- buy, build, or substantially improve a qualified
mine your deductible mortgage interest. home isn't home acquisition debt.
4. Meets at least one of the following require-
ments. Mortgage that qualifies later. A mortgage
a. Receives at least 80% of its gross in-
come for the year in which the mort-
Part II. Limits on Home that doesn't qualify as home acquisition debt
because it doesn't meet all the requirements
gage interest is paid or incurred from Mortgage Interest may qualify at a later time. For example, a debt
that you use to buy your home may not qualify
tenant-stockholders. For this purpose,
gross income is all income received Deduction as home acquisition debt because it isn't se-
during the entire year, including cured by the home. However, if the debt is later
amounts received before the corpora- This part of the publication discusses the limits secured by the home, it may qualify as home
tion changed to cooperative owner- on deductible home mortgage interest. These acquisition debt after that time. Similarly, a debt
ship. limits apply to your home mortgage interest ex- that you use to buy property may not qualify be-
pense if you have a home mortgage that cause the property isn't a qualified home. How-
b. At all times during the year, at least doesn't fit into any of the three categories listed ever, if the property later becomes a qualified
80% of the total square footage of the at the beginning of Part I under Fully deductible home, the debt may qualify after that time.
corporation's property is used or avail- interest, earlier.
able for use by the tenant-stockhold- Mortgage treated as used to buy, build, or
ers for residential or residential-rela- Your home mortgage interest deduction is substantially improve home. A mortgage se-
ted use. limited to the interest on the part of your home cured by a qualified home may be treated as
mortgage debt that isn't more than your quali- home acquisition debt, even if you don't actually
c. At least 90% of the corporation's ex-
fied loan limit. This is the part of your home use the proceeds to buy, build, or substantially
penditures paid or incurred during the
mortgage debt that is grandfathered debt or that improve the home. This applies in the following
year are for the acquisition, construc-
isn't more than the limits for home acquisition situations.
tion, management, maintenance, or
debt. Table 1 can help you figure your qualified
care of corporate property for the ben- 1. You buy your home within 90 days before
loan limit and your deductible home mortgage
efit of the tenant-stockholders. or after the date you take out the mort-
interest.
gage. The home acquisition debt is limited
Stock used to secure debt. In some cases, to the home's cost, plus the cost of any
you can't use your cooperative housing stock to Home Acquisition Debt substantial improvements within the limit
secure a debt because of either: described below in (2) or (3). (See Exam-
• Restrictions under local or state law, or Home acquisition debt is a mortgage you took ple 1, later.)
• Restrictions in the cooperative agreement out after October 13, 1987, to buy, build, or sub-
(other than restrictions in which the main stantially improve a qualified home (your main 2. You build or substantially improve your
purpose is to permit the tenant- or second home). It also must be secured by home and take out the mortgage before
stockholder to treat unsecured debt as se- that home. the work is completed. The home acquisi-
cured debt). tion debt is limited to the amount of the ex-
If the amount of your mortgage is more than penses incurred within 24 months before
However, you can treat a debt as secured by the date of the mortgage.
the stock to the extent that the proceeds are the cost of the home plus the cost of any sub-
used to buy the stock under the allocation of in- stantial improvements, only the debt that isn't 3. You build or substantially improve your
terest rules. See chapter 4 of Pub. 535 for de- more than the cost of the home plus substantial home and take out the mortgage within 90
tails on these rules. improvements qualifies as home acquisition days after the work is completed. The
debt. home acquisition debt is limited to the
Figuring deductible home mortgage inter- amount of the expenses incurred within
est. Generally, if you're a tenant-stockholder, Home acquisition debt limit. The total the period beginning 24 months before the
you can deduct payments you make for your amount you (or your spouse if married filing a work is completed and ending on the date
share of the interest paid or incurred by the co- joint return) can treat as home acquisition debt of the mortgage. (See Example 2, later.)
operative. The interest must be on a debt to on your main home and second home is limited
buy, build, change, improve, or maintain the co- based on when the debt is secured. Example 1. You bought your main home on
operative's housing, or on a debt to buy the • For debt secured after October 13, 1987, June 3 for $175,000. You paid for the home with
land. and prior to December 16, 2017, the limit is cash you got from the sale of your old home. On
$1 million ($500,000 if married filing sepa- July 15, you took out a mortgage of $150,000
Figure your share of this interest by multiply-
rately). secured by your main home. You used the
ing the total by the following fraction.
• For debt secured after December 15, $150,000 to invest in stocks. You can treat the
Your shares of stock in the 2017, the limit is $750,000 ($375,000 if mortgage as taken out to buy your home be-
cooperative married filing separately). However, a tax- cause you bought the home within 90 days be-
The total shares of stock payer who enters into a written binding fore you took out the mortgage. The entire mort-
in the cooperative contract before December 15, 2017, to gage qualifies as home acquisition debt
close on the purchase of a principal resi- because it wasn't more than the home's cost.
dence before January 1, 2018, and who
purchases such residence before April 1,

Publication 936 (2018) Page 9

 Example 2. On January 31, John began for architects and design plans, and required new debt is more than that mortgage principal,
building a home on the lot that he owned. He building permits. it is treated as home acquisition debt (so long
used $45,000 of his personal funds to build the as the proceeds were used to buy, build, or
home. The home was completed on October Substantial improvement. An improve- substantially improve the home), and the mort-
31. On November 21, John took out a $36,000 ment is substantial if it: gage is a mixed-use mortgage (discussed later
mortgage that was secured by the home. The • Adds to the value of your home, under Average Mortgage Balance in the Ta-
mortgage can be treated as used to build the • Prolongs your home's useful life, or ble 1 Instructions). The debt must be secured
home because it was taken out within 90 days • Adapts your home to new uses. by the qualified home.
after the home was completed. The entire mort- Repairs that maintain your home in good You treat grandfathered debt that was refi-
gage qualifies as home acquisition debt be- condition, such as repainting your home, aren't nanced after October 13, 1987, as grandfath-
cause it wasn't more than the expenses incur- substantial improvements. However, if you ered debt only for the term left on the debt that
red within the period beginning 24 months paint your home as part of a renovation that was refinanced. After that, you treat it as home
before the home was completed. This is illustra- substantially improves your qualified home, you acquisition debt to the extent that it was used to
ted by Figure C. can include the painting costs in the cost of the buy, build, or substantially improve the home.
improvements.
Figure C. Exception. If the debt before refinancing
Acquiring an interest in a home because was like a balloon note (the principal on the
Home
of a divorce. If you incur debt to acquire the in- debt wasn't amortized over the term of the
John Completed
Starts ($45,000 in $36,000 terest of a spouse or former spouse in a home debt), then you treat the refinanced debt as
Building Personal Mortgage because of a divorce or legal separation, you grandfathered debt for the term of the first refi-
Home Funds Used) Taken Out can treat that debt as home acquisition debt. nancing. This term can't be more than 30 years.
䊱 䊱 䊱 Part of home not a qualified home. To Example. Chester took out a $200,000 first
figure your home acquisition debt, you must di- mortgage on his home in 1986. The mortgage
Jan. 31 Oct. 31 Nov. 21 vide the cost of your home and improvements was a 5-year balloon note and the entire bal-
between the part of your home that is a qualified ance on the note was due in 1991. Chester refi-
home and any part that isn't a qualified home. nanced the debt in 1991 with a new 30-year
䊲 䊲 See Divided use of your home under Qualified mortgage. The refinanced debt is treated as
9 Months 22 Days Home in Part I, earlier. grandfathered debt for its entire term (30 years).
(Within 24 Months) (Within 90 Days)
Grandfathered Debt Table 1 Instructions
Date of the mortgage. The date you take
out your mortgage is the day the loan proceeds If you took out a mortgage on your home before You can deduct all of the interest you paid dur-
are disbursed. This is generally the closing October 14, 1987, or you refinanced such a ing the year on mortgages secured by your
date. You can treat the day you apply in writing mortgage, it may qualify as grandfathered debt. main home or second home in either of the fol-
for your mortgage as the date you take it out. To qualify, it must have been secured by your lowing two situations.
However, this applies only if you receive the qualified home on October 13, 1987, and at all • All the mortgages are grandfathered debt.
loan proceeds within a reasonable time (such times after that date. How you used the pro- • The total of the mortgage balances for the
as within 30 days) after your application is ap- ceeds doesn't matter. entire year is within the limits discussed
proved. If a timely application you make is re- Grandfathered debt isn't limited. All of the in- earlier under Home Acquisition Debt.
jected, a reasonable additional time will be al- terest you paid on grandfathered debt is fully
lowed to make a new application. In either of those cases, you don't need Table 1.
deductible home mortgage interest. However,
Otherwise, you can use Table 1 to determine
the amount of your grandfathered debt reduces
Cost of home or improvements. To deter- your qualified loan limit and deductible home
the limit for home acquisition debt.
mine your cost, include amounts paid to acquire mortgage interest.
any interest in a qualified home or to substan- Refinanced grandfathered debt. If you refi- Fill out only one Table 1 for both your
tially improve the home. nanced grandfathered debt after October 13, TIP main and second home regardless of
The cost of building or substantially improv- 1987, for an amount that wasn't more than the how many mortgages you have.
ing a qualified home includes the costs to ac- mortgage principal left on the debt, then you still
quire real property and building materials, fees treat it as grandfathered debt. To the extent the

Page 10 Publication 936 (2018)

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

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

2. Enter the average balance of all your home acquisition debt incurred prior to
December 16, 2017. See the line 2 instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.

3. Enter $1,000,000 ($500,000 if married filing separately) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Enter the larger of the amount on line 1 or the amount on line 3 . . . . . . . . . . . . . . . . . . . . 4.

5. Add the amounts on lines 1 and 2. Enter the total here . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Enter the smaller of the amount on line 4 or the amount on line 5 . . . . . . . . . . . . . . . . . . 6.

• If you have no home acquisition debt incurred after December 15, 2017, line 6 is
your qualified loan limit. Enter this amount on line 11 and go to Part II, line 12.
• If you have home acquisition debt incurred after December 15, 2017, go to line 7.
7. Enter the average balance of all your home acquisition debt incurred after December
15, 2017. See the line 7 instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Enter $750,000 ($375,000 if married filing separately) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.

9. Enter the larger of the amount on line 6 or the amount on line 8 . . . . . . . . . . . . . . . . . . . . 9.

10. Add the amounts on lines 6 and 7. Enter the total here . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

11. Enter the smaller of line 9 or line 10. This is your qualified loan limit . . . . . . . . . . . . . 11.

Part II Deductible Home Mortgage Interest

12. Enter the total of the average balances of all mortgages on all qualified homes.
See the line 12 instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

• If line 11 is less than line 12, go on to line 13.

• If line 11 is equal to or more than line 12, stop here. All of your interest on all the
mortgages included on line 12 is deductible as home mortgage interest on
Schedule A (Form 1040).
13. Enter the total amount of interest that you paid. See the line 13 instructions . . . . . . . . 13.

14. Divide the amount on line 11 by the amount on line 12. Enter the result as a decimal
amount (rounded to three places) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. ×.

15. Multiply the amount on line 13 by the decimal amount on line 14. Enter the result.
This is your deductible home mortgage interest. Enter this amount on
Schedule A (Form 1040) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.

16. Subtract the amount on line 15 from the amount on line 13. Enter the result. This
isn't home mortgage interest. See the line 16 instructions . . . . . . . . . . . . . . . . . . . . . . 16.

7, and 12 of Table 1. You can use the highest of debt, see Mixed-use mortgages, later, in this
Average Mortgage Balance mortgage balances during the year, but you section.
may benefit most by using the average balan-
You have to figure the average balance of each ces. The following are methods you can use to
mortgage to determine your qualified loan limit. figure your average mortgage balances. How-
You need these amounts to complete lines 1, 2, ever, if a mortgage has more than one category

Publication 936 (2018) Page 11

Average of first and last balance method. 2. Add together the monthly balances figured
1. Enter the interest paid in 2018.
You can use this method if all the following ap- for b and c in (1).
Don’t include points, mortgage
ply.
insurance premiums, or any 3. Divide the result in (2) by 12.
• You didn't borrow any new amounts on the
mortgage during the year. (This doesn't in- interest paid in 2018 that is for
Complete line 12 of Table 1 by including the
clude borrowing the original mortgage a year after 2018. However,
average balance of the entire mixed-use mort-
amount.) do include interest that is for
gage, figured under one of the methods descri-
• You didn't prepay more than 1 month's 2018 but was paid in an earlier bed earlier in this section.
principal during the year. (This includes year . . . . . . . . . . . . . . . . . . . . . . . $2,500
prepayment by refinancing your home or 2. Enter the annual interest rate Example 1. In 1986, Sharon took out a first
by applying proceeds from its sale.) on the mortgage. If the interest mortgage of $1,400,000. The mortgage was a
• You had to make level payments at fixed rate varied in 2018, use the 5-year balloon note and the entire balance on
equal intervals on at least a semi-annual 0.09 the note was due in 1991. She refinanced the
lowest rate for the year . . . . . . .
basis. You treat your payments as level debt in 1991 with a new 30-year mortgage
even if they were adjusted from time to 3. Divide the amount on line 1 by (grandfathered debt). On March 2, 2018, when
time because of changes in the interest the amount on line 2. Enter the the home had a fair market value of $1,700,000
rate. result . . . . . . . . . . . . . . . . . . . . . . $27,778 and she owed $500,000 on the mortgage,
Sharon took out a second mortgage for
To figure your average balance, com-
$200,000. She used $180,000 of the proceeds
plete the following worksheet. Statements provided by your lender. If you
to make substantial improvements to her home
receive monthly statements showing the closing
(home acquisition debt) and the remaining
balance or the average balance for the month,
$20,000 to buy a car (home equity debt). Under
you can use either to figure your average bal-
1. Enter the balance as of the first the loan agreement, Sharon must make princi-
ance for the year. You can treat the balance as
day of the year that the pal payments of $1,000 at the end of each
zero for any month the mortgage wasn't se-
mortgage was secured by your month. During 2018, her principal payments on
cured by your qualified home.
qualified home during the year the second mortgage totaled $10,000.
For each mortgage, figure your average bal-
(generally, January 1) . . . . . . . . To complete Table 1, line 7, Sharon must
ance by adding your monthly closing or average
figure a separate average balance for the part
2. Enter the balance as of the last balances and dividing that total by the number
of her second mortgage that is home acquisi-
day of the year that the of months the home secured by that mortgage
tion debt. The January and February balances
mortgage was secured by your was a qualified home during the year.
were zero. The March through December bal-
qualified home during the year If your lender can give you your average bal- ances were all $180,000 because none of her
(generally, December 31) . . . . ance for the year, you can use that amount. principal payments are applied to the home ac-
quisition debt. (They are all applied to the home
3. Add amounts on lines 1 and Example. Ms. Brown had a home loan se- equity debt, reducing it to $10,000 [$20,000 −
2 .......................... cured by her main home all year. She received $10,000].) The monthly balances of the home
monthly statements showing her average bal- acquisition debt total $1,800,000 ($180,000 ×
4. Divide the amount on line 3 by
ance for each month. She can figure her aver- 10). Therefore, the average balance of the
2.0. Enter the result . . . . . . . . . .
age balance for the year by adding her monthly home acquisition debt for 2018 was $150,000
average balances and dividing the total by 12. ($1,800,000 ÷ 12).
Interest paid divided by interest rate
method. You can use this method if at all times Mixed-use mortgages. A mixed-use mort- Example 2. The facts are the same as in
in 2018 the mortgage was secured by your gage is a loan that consists of more than one of Example 1. In 2019, Sharon's January through
qualified home and the interest was paid at the three categories of debt (grandfathered October principal payments on her second
least monthly. debt, home acquisition debt, and home equity mortgage are applied to the home equity debt,
debt). For example, a mortgage you took out reducing it to zero. The balance of the home ac-
Complete the following worksheet to
during the year is a mixed-use mortgage if you quisition debt remains $180,000 for each of
figure your average balance.
used its proceeds partly to refinance a mort- those months. Because her November and De-
gage that you took out in an earlier year to buy cember principal payments are applied to the
your home (home acquisition debt) and partly to home acquisition debt, the November balance
1. Enter the interest paid in 2018. buy a car (home equity debt). is $179,000 ($180,000 − $1,000) and the De-
Don't include points, mortgage Complete lines 1, 2, and 7 of Table 1 by in- cember balance is $178,000 ($180,000 −
insurance premiums, or any cluding the separate average balances of any $2,000). The monthly balances total $2,157,000
interest paid in 2018 that is for a grandfathered debt and home acquisition debt [($180,000 × 10) + $179,000 + $178,000].
year after 2018. However, do (determined by the date the debt was acquired) Therefore, the average balance of the home ac-
include interest that is for 2018 in your mixed-use mortgage. Don’t use the quisition debt for 2019 is $179,750 ($2,157,000
but was paid in an earlier methods described earlier in this section to fig- ÷ 12).
year . . . . . . . . . . . . . . . . . . . . . . . . ure the average balance of either category. In-
stead, for each category, use the following
2. Enter the annual interest rate on method. Line 1
the mortgage. If the interest rate
1. Figure the balance of that category of debt Figure the average balance for the current year
varied in 2018, use the lowest
for each month. This is the amount of the of each mortgage you had on all qualified
rate for the year . . . . . . . . . . . . . .
loan proceeds allocated to that category, homes on October 13, 1987 (grandfathered
3. Divide the amount on line 1 by reduced by your principal payments on the debt). Add the results together and enter the to-
the amount on line 2. Enter the mortgage previously applied to that cate- tal on line 1. Include the average balance for the
result . . . . . . . . . . . . . . . . . . . . . . . gory. Principal payments on a mixed-use current year for any grandfathered debt part of
mortgage are applied in full to each cate- a mixed-use mortgage.
gory of debt, until its balance is zero, in the
Example. Mr. Blue had a mortgage se-
following order. Line 2
cured by his main home all year. He paid inter-
est of $2,500 on this loan. The interest rate on a. First, any home equity debt.
the loan was 9% (0.09) all year. His average Figure the average balance for the current year
b. Next, any grandfathered debt. of each mortgage you took out on all qualified
balance using this method is $27,778, figured
as follows. c. Finally, any home acquisition debt. homes after October 13, 1987, and prior to

Page 12 Publication 936 (2018)

December 16, 2017, to buy, build, or substan- Note. When figuring the average balance of 2. Multiply the amount in item (1) by the deci-
tially improve the home (home acquisition a mixed-use mortgage for line 12, determine the mal amount on line 14. Enter the result on
debt). Add the results together and enter the to- average balance of the entire mortgage. Schedule A (Form 1040), line 8. This
tal on line 2. Include the average balance for the amount is fully deductible.
current year for any home acquisition debt part Line 13 3. Subtract the result in item (2) from the
of a mixed-use mortgage.
amount in item (1). This amount isn't de-
If you make payments to a financial institution, ductible as home mortgage interest. How-
Line 7 or to a person whose business is making loans, ever, if you used any of the loan proceeds
you should get Form 1098 or a similar state- for business or investment activities, see
Figure the average balance for the current year ment from the lender. This form will show the the instructions for line 16 next.
of each mortgage you took out on all qualified amount of interest to enter on line 13. Also in-
homes after December 15, 2017, to buy, build, clude on this line any other interest payments
or substantially improve the home (home ac- made on debts secured by a qualified home for Line 16
quisition debt). Add the results together and en- which you didn't receive a Form 1098. Don't in-
You can't deduct the amount of interest on
ter the total on line 7. clude points on this line.
line 16 as home mortgage interest. If you didn't
use any of the proceeds of any mortgage inclu-
Line 12 Claiming your deductible points. Figure
ded on line 12 of the worksheet for business, in-
your deductible points as follows.
vestment, or other deductible activities, then all
Figure the average balance for the current year 1. Figure your deductible points for the cur- the interest on line 16 is personal interest. Per-
of each outstanding home mortgage. Add the rent year using the rules explained under sonal interest isn't deductible.
average balances together and enter the total Points in Part I, earlier.
on line 12. See Average Mortgage Balance,
earlier.

Publication 936 (2018) Page 13

Table 2. Where To Deduct Your Interest Expense

IF you have ... THEN deduct it on ... AND for more information, go to ...
deductible student loan interest Schedule 1 (Form 1040), line 33 Pub. 970, Tax Benefits for Education.
deductible home mortgage interest Schedule A (Form 1040), line 8 this publication (936).
and points reported on Form 1098
deductible home mortgage interest Schedule A (Form 1040), line 8 this publication (936).
not reported on Form 1098
deductible points not reported on Schedule A (Form 1040), line 8 this publication (936).
Form 1098
deductible investment interest (other Schedule A (Form 1040), line 9 Pub. 550, Investment Income and
than incurred to produce rents or Expenses.
royalties)
deductible business interest Schedule C or C-EZ (Form 1040) Pub. 535, Business Expenses.
(non-farm)
deductible farm business interest Schedule F (Form 1040) Pubs. 225, Farmer's Tax Guide, and
535, Business Expenses.
deductible interest incurred to Schedule E (Form 1040) Pubs. 527, Residential Rental
produce rents or royalties Property, and 535, Business
Expenses.
personal interest not deductible.

Don determines that the proceeds of mort- Tax reform. Major tax reform legislation im-
If you did use all or part of any mortgage gage A are allocable to personal expenses for pacting individuals, businesses, and tax-ex-
proceeds for business, investment, or other de- the entire year. The proceeds of mortgage B empt entities was enacted in the Tax Cuts and
ductible activities, the part of the interest on are allocable to his business for the entire year. Jobs Act on December 22, 2017. Go to
line 16 that is allocable to those activities can Don paid $14,000 of interest on mortgage A IRS.gov/TaxReform for information and up-
be deducted as business, investment, or other and $16,000 of interest on mortgage B. He fig- dates on how this legislation affects your taxes.
deductible expense, subject to any limits that ures the amount of home mortgage interest he
apply. Table 2 shows where to deduct that in- can deduct by using Table 1. Don determines Preparing and filing your tax return. Find
terest. See Allocation of Interest in chapter 4 of that $15,000 of the interest can be deducted as free options to prepare and file your return on
Pub. 535 for an explanation of how to determine home mortgage interest. IRS.gov or in your local community if you qual-
the use of loan proceeds. The interest Don can allocate to his busi- ify.
ness is the smaller of: The Volunteer Income Tax Assistance
The following two rules describe how to allo- (VITA) program offers free tax help to people
1. The amount on Table 1, line 16 of the
cate the interest on line 16 to a business or in- who generally make $55,000 or less, persons
worksheet ($15,000); or
vestment activity. with disabilities, and limited-English-speaking
• If you used all of the proceeds of the mort- 2. The total amount of interest allocable to taxpayers who need help preparing their own
gages on line 12 for one activity, then all the business ($16,500), figured by multi- tax returns. The Tax Counseling for the Elderly
the interest on line 16 is allocated to that plying the amount on line 13 (the $30,000 (TCE) program offers free tax help for all tax-
activity. In this case, deduct the interest on total interest paid) by the following frac- payers, particularly those who are 60 years of
the form or schedule to which it applies. tion. age and older. TCE volunteers specialize in an-
• If you used the proceeds of the mortgages swering questions about pensions and retire-
on line 12 for more than one activity, then $110,000 (the average balance ment-related issues unique to seniors.
you can allocate the interest on line 16 of the mortgage allocated You can go to IRS.gov and click on the Fil-
among the activities in any manner you se- to the business) ing tab to see your options for preparing and fil-
lect (up to the total amount of interest oth- $200,000 (the total average ing your return which include the following.
erwise allocable to each activity, explained balance of all mortgages) • Free File. Go to IRS.gov/FreeFile to see if
next). you qualify to use brand-name software to
Because $15,000 is the smaller of items (1) prepare and e-file your federal tax return
You figure the total amount of interest other- and (2), that is the amount of interest Don can for free.
wise allocable to each activity by multiplying the allocate to his business. He deducts this • VITA. Go to IRS.gov/VITA, download the
amount on line 13 by the following fraction. amount on his Schedule C (Form 1040). free IRS2Go app, or call 800-906-9887 to
Amount on line 12 find the nearest VITA location for free tax
allocated to that activity return preparation.
Total amount on line 12 How To Get Tax Help • TCE. Go to IRS.gov/TCE, download the
free IRS2Go app, or call 888-227-7669 to
If you have questions about a tax issue, need find the nearest TCE location for free tax
Example. Don had two mortgages (A and return preparation.
help preparing your tax return, or want to down-
B) on his main home during the entire year.
load free publications, forms, or instructions, go Getting answers to your tax law
Mortgage A had an average balance of
to IRS.gov and find resources that can help you questions. On IRS.gov, get answers
$90,000, and mortgage B had an average bal-
right away.
ance of $110,000.

Page 14 Publication 936 (2018)

to your tax questions anytime, anywhere. Using online tools to help prepare your re- • Check or money order: Mail your pay-
turn. Go to IRS.gov/Tools for the following. ment to the address listed on the notice or
• Go to IRS.gov/Help for a variety of tools • The Earned Income Tax Credit Assistant instructions.
that will help you get answers to some of
the most common tax questions.
(IRS.gov/EITCAssistant) determines if • Cash: You may be able to pay your taxes
you’re eligible for the EIC. with cash at a participating retail store.
• Go to IRS.gov/ITA for the Interactive Tax • The Online EIN Application (IRS.gov/EIN)
Assistant, a tool that will ask you questions
helps you get an employer identification What if I can’t pay now? Go to IRS.gov/
on a number of tax law topics and provide
number. Payments for more information about your op-
answers. You can print the entire interview
and the final response for your records.
• The IRS Withholding Calculator (IRS.gov/ tions.
W4App) estimates the amount you should • Apply for an online payment agreement
• Go to IRS.gov/Pub17 to get Pub. 17, Your have withheld from your paycheck for fed- (IRS.gov/OPA) to meet your tax obligation
Federal Income Tax for Individuals, which
eral income tax purposes and can help you in monthly installments if you can’t pay
features details on tax-saving opportuni-
perform a “paycheck checkup.” your taxes in full today. Once you complete
ties, 2018 tax changes, and thousands of
interactive links to help you find answers to
• The First Time Homebuyer Credit Account the online process, you will receive imme-
Look-up (IRS.gov/HomeBuyer) tool pro- diate notification of whether your agree-
your questions. View it online in HTML, as
vides information on your repayments and ment has been approved.
a PDF, or download it to your mobile de-
account balance. • Use the Offer in Compromise Pre-Qualifier
vice as an eBook.
• The Sales Tax Deduction Calculator (IRS.gov/OIC) to see if you can settle your
• You may also be able to access tax law in- (IRS.gov/SalesTax) figures the amount you tax debt for less than the full amount you
formation in your electronic filing software.
can claim if you itemize deductions on owe.
Schedule A (Form 1040), choose not to
Getting tax forms and publications. Go to claim state and local income taxes, and Checking the status of an amended return.
IRS.gov/Forms to view, download, or print all of you didn’t save your receipts showing the Go to IRS.gov/WMAR to track the status of
the forms and publications you may need. You sales tax you paid. Form 1040X amended returns. Please note that
can also download and view popular tax publi- it can take up to 3 weeks from the date you
cations and instructions (including the 1040 in- Resolving tax-related identity theft issues. mailed your amended return for it to show up in
structions) on mobile devices as an eBook at no • The IRS doesn’t initiate contact with tax- our system and processing it can take up to 16
charge. Or you can go to IRS.gov/OrderForms payers by email or telephone to request weeks.
to place an order and have forms mailed to you personal or financial information. This in-
cludes any type of electronic communica- Understanding an IRS notice or letter. Go to
within 10 business days.
tion, such as text messages and social me- IRS.gov/Notices to find additional information
Access your online account (individual tax- dia channels. about responding to an IRS notice or letter.
payers only). Go to IRS.gov/Account to se- • Go to IRS.gov/IDProtection for information.
• If your SSN has been lost or stolen or you Contacting your local IRS office. Keep in
curely access information about your federal tax
suspect you’re a victim of tax-related iden- mind, many questions can be answered on
account.
tity theft, visit IRS.gov/IdentityTheft to learn IRS.gov without visiting an IRS Tax Assistance
• View the amount you owe, pay online, or Center (TAC). Go to IRS.gov/LetUsHelp for the
set up an online payment agreement. what steps you should take.
topics people ask about most. If you still need
• Access your tax records online. help, IRS TACs provide tax help when a tax is-
• Review the past 24 months of your pay- Checking on the status of your refund.
ment history. • Go to IRS.gov/Refunds. sue can’t be handled online or by phone. All
• Go to IRS.gov/SecureAccess to review the • The IRS can’t issue refunds before TACs now provide service by appointment so
mid-February 2019 for returns that claimed you’ll know in advance that you can get the
required identity authentication process.
the EIC or the ACTC. This applies to the service you need without long wait times. Be-
entire refund, not just the portion associ- fore you visit, go to IRS.gov/TACLocator to find
Using direct deposit. The fastest way to re-
ated with these credits. the nearest TAC, check hours, available serv-
ceive a tax refund is to combine direct deposit
and IRS e-file. Direct deposit securely and elec- • Download the official IRS2Go app to your ices, and appointment options. Or, on the
mobile device to check your refund status. IRS2Go app, under the Stay Connected tab,
tronically transfers your refund directly into your
financial account. Eight in 10 taxpayers use di- • Call the automated refund hotline at choose the Contact Us option and click on “Lo-
800-829-1954. cal Offices.”
rect deposit to receive their refund. The IRS is-
sues more than 90% of refunds in less than 21
Making a tax payment. The IRS uses the lat- Watching IRS videos. The IRS Video portal
days.
est encryption technology to ensure your elec- (IRSVideos.gov) contains video and audio pre-
tronic payments are safe and secure. You can sentations for individuals, small businesses,
Refund timing for returns claiming certain
make electronic payments online, by phone, and tax professionals.
credits. The IRS can’t issue refunds before
mid-February 2019 for returns that claimed the and from a mobile device using the IRS2Go
app. Paying electronically is quick, easy, and Getting tax information in other languages.
earned income credit (EIC) or the additional
faster than mailing in a check or money order. For taxpayers whose native language isn’t Eng-
child tax credit (ACTC). This applies to the en-
Go to IRS.gov/Payments to make a payment lish, we have the following resources available.
tire refund, not just the portion associated with
using any of the following options. Taxpayers can find information on IRS.gov in
these credits.
• IRS Direct Pay: Pay your individual tax bill the following languages.
Getting a transcript or copy of a return. The or estimated tax payment directly from • Spanish (IRS.gov/Spanish).
quickest way to get a copy of your tax transcript your checking or savings account at no • Chinese (IRS.gov/Chinese).
is to go to IRS.gov/Transcripts. Click on either cost to you. • Vietnamese (IRS.gov/Vietnamese).
"Get Transcript Online" or "Get Transcript by • Debit or credit card: Choose an ap- • Korean (IRS.gov/Korean).
Mail" to order a copy of your transcript. If you proved payment processor to pay online, • Russian (IRS.gov/Russian).
prefer, you can: by phone, and by mobile device. The IRS TACs provide over-the-phone inter-
• Order your transcript by calling • Electronic Funds Withdrawal: Offered preter service in over 170 languages, and the
800-908-9946, or only when filing your federal taxes using service is available free to taxpayers.
• Mail Form 4506-T or Form 4506T-EZ (both tax return preparation software or through
available on IRS.gov). a tax professional.
• Electronic Federal Tax Payment Sys-
tem: Best option for businesses. Enroll-
ment is required.

Publication 936 (2018) Page 15

The Taxpayer Advocate free. If you qualify for their assistance, you will these broad issues, please report it to them at
be assigned to one advocate who will work with IRS.gov/SAMS.
Service (TAS) Is Here To you throughout the process and will do every-
Help You thing possible to resolve your issue. TAS can TAS also has a website, Tax Reform
What is TAS? help you if: Changes, which shows you how the new tax
• Your problem is causing financial difficulty law may change your future tax filings and helps
TAS is an independent organization within the for you, your family, or your business; you plan for these changes. The information is
IRS that helps taxpayers and protects taxpayer • You face (or your business is facing) an categorized by tax topic in the order of the IRS
rights. Their job is to ensure that every taxpayer immediate threat of adverse action; or Form 1040. Go to TaxChanges.us for more in-
is treated fairly and that you know and under- • You’ve tried repeatedly to contact the IRS formation.
stand your rights under the Taxpayer Bill of but no one has responded, or the IRS
hasn’t responded by the date promised.
Rights. Low Income Taxpayer
How Can You Reach TAS?
Clinics (LITCs)
How Can You Learn About Your
Taxpayer Rights? LITCs are independent from the IRS. LITCs
TAS has offices in every state, the District of
represent individuals whose income is below a
The Taxpayer Bill of Rights describes 10 basic Columbia, and Puerto Rico. Your local advo-
certain level and need to resolve tax problems
rights that all taxpayers have when dealing with cate’s number is in your local directory and at
with the IRS, such as audits, appeals, and tax
the IRS. Go to TaxpayerAdvocate.IRS.gov to TaxpayerAdvocate.IRS.gov/Contact-Us. You
collection disputes. In addition, clinics can pro-
help you understand what these rights mean to can also call them at 877-777-4778.
vide information about taxpayer rights and re-
you and how they apply. These are your rights. sponsibilities in different languages for individu-
Know them. Use them. How Else Does TAS Help als who speak English as a second language.
Taxpayers? Services are offered for free or a small fee. To
What Can TAS Do For You? find a clinic near you, visit
TAS works to resolve large-scale problems that TaxpayerAdvocate.IRS.gov/LITCmap or see
TAS can help you resolve problems that you affect many taxpayers. If you know of one of IRS Pub. 4134, Low Income Taxpayer Clinic
can’t resolve with the IRS. And their service is List.

To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Grandfathered 2, 10 Cost of 10
A Home acquisition 2, 9 Destroyed 4 L
Acquisition debt 2, 9, 10 Not secured by home 3 Divided use 4, 10 Lender mortgage statements 12
Alimony 5 Secured 3 Grandfathered debt 2, 10 Limits:
Amortization: Deductions 2, 5 Improvement loan, points 7 Cooperative housing, mortgage
Points 7 Home office 4 Main 4 interest deduction 9
Appraisal fees 7 Points 7, 13 Office in 4 Deductibility of points 8
Armed forces: Deed preparation costs 7 Qualified 4 Home acquisition debt 9
Housing allowance 5 Divorced taxpayers 5, 10 Renting out part of 4 Home mortgage interest
Assistance (See Tax help) Sale of 4 deduction 9
Average mortgage balance 11 Second 4 Qualified loan limit 11
E Time-sharing arrangements 4 Line 10 8
Emergency Homeowners' Loan Housing allowance: Loans 8, 9
B Program 5 Ministers and military 5 (See also Mortgages)
Borrowers: Home improvement, points 7
More than one 8 Qualified loan limit 11
Seller-paid points, treatment by F I
buyer 8 Fees: Identity theft 15
Business: Appraisal 7 Improvements: M
Average mortgage balance, total Notaries 7 Cost of 10 Main home 4
amount of interest otherwise Points (See Points) Home acquisition debt 9 Married taxpayers 4
allowable to each activity 13 Figures (See Tables and figures) Points 7 Military housing allowance 5
Mortgage proceeds used for 8 Form 1040, Schedule A 8, 14 Substantial 10 Ministers' housing allowance 5
Form 1040, Schedule C or Interest 2 Missing children, photographs
C-EZ 14 (See also Mortgage interest) of 1
C Form 1040, Schedule E 14 Interest rate method 12 Mixed-use mortgages 12
Clergy: Form 1040, Schedule F 14 Refunded 5, 8 Mortgage interest 2
Ministers' and military housing Form 1098 8 Where to deduct 14 Cooperative housing 9
allowance 5 Form 8396 5 Investments: Credit 5
Cooperative housing 4, 5, 8, 9 Average mortgage balance and Fully deductible interest 2
Cost of home or total amount of interest Home mortgage interest 2, 5
improvements 10 G allowable 13 How to report 8
Credits 5 Grandfathered debt 2, 10 Mortgage proceeds used for 5, Late payment charges 4
Ground rents 5 8 Limits on deduction 9
Ministers' and military housing
D allowance 5
Date of mortgage 10 H J Prepaid interest 5, 8
Debt: Hardest Hit Fund Program 5 Joint returns 4 Prepayment penalty 4
Choice to treat as not secured by Home 2 Refunds 5, 8
home 4 Acquisition debt 2, 9 Sale of home 4
Construction 4

Page 16 Publication 936 (2018)

 Special situations 4 Notary fees 7 Stock:
Statement 8 R Cooperative housing 9
Where to deduct 14 Redeemable ground rents 5
Worksheet to figure (Table 1) 11 O Refinancing 7
Mortgage Interest Statement 8 Office in home 4 Grandfathered debt 10 T
Mortgages: Home acquisition debt 9 Tables and figures:
Assistance payments (under Refunds 5, 8 Deductible home mortgage
sec. 235 of National Housing P Rent: interest:
Act) 5 Penalties: Nonredeemable ground rents 5 Fully deductible,
Average balance 11 Mortgage prepayment 4 Redeemable ground rents 5 determination of (Figure
Date of 10 Points 5–8 Rental payments 5 A) 2
Ending early 8 Claiming deductible 13 Renting of home: How to figure (Table 1) 11
Late qualifying 9 Exception to general rule 7 Part of 4 Mortgage to buy, build, or
Mixed-use 12 Excess 8 Time-sharing arrangements 4 improve home (Figure C) 10
Preparation costs for note or Funds provided less than 8 Repairs 10 Points (Figure B) 5
deed of trust 7 General rule 7 Reverse Mortgages 5 Qualified loan limit worksheet
Proceeds invested in tax-exempt Home improvement loans 7 (Table 1) 11
securities 5 Seller paid 7 Tax credits 5
Proceeds used for business 8 Prepaid interest 5, 8 S Tax-exempt securities:
Proceeds used for investment 8 Prepayment penalties 4 Sale of home 4 Mortgage proceeds invested
Qualified loan limit 11 Publications (See Tax help) Second home 4, 7 in 5
Refinanced 7, 9, 10 Secured debt 3 Tax help 14
Reverse 5 Seller-paid points 7 Time-sharing arrangements 4
Statements provided by Q Separated taxpayers 5
lender 12 Qualified homes 4 Separate returns 4
To buy, build, or improve 9 Qualified loan limit: Share of Interest 9 W
Wraparound 3 Average mortgage balance 11 Special Method 5 Worksheets:
Worksheet to figure (Table 1) 11 Spouses 4 Deductible home mortgage
Statements provided by interest 11
N lender 12 Qualified loan limit 11
Nonredeemable ground rents 5 Wraparound mortgages 3

Publication 936 (2018) Page 17