The Mortgage Interest Deduction in Florida: What Counts and Who Benefits
The mortgage interest deduction Florida homeowners claim is federal only, since Florida has no income tax. It helps only if you itemize, and the loan limit and use of funds matter.
The mortgage interest deduction Florida homeowners claim is a federal deduction, since Florida has no state income tax.
It helps only if your itemised deductions beat the standard deduction. The loan limit and what the money was used for decide what counts. This is general information; a tax professional applies it to your return.
The basic rule
Interest on a loan secured by your main home or a second home, used to buy, build or improve it.
The IRS Publication 936 sets the rules.
The loan must be secured by the home.
Unsecured debt used for the home does not count.
The deduction goes on Schedule A.
The loan limit
Interest on up to $750,000 of acquisition debt for loans after late 2017.
Older loans keep the prior $1,000,000 limit.
See our guide to jumbo loans in Florida.
Above the limit, only a proportion of the interest is deductible.
South Florida jumbo borrowers hit this often.
Itemising versus the standard deduction
The standard deduction is large enough that many homeowners no longer itemise.
Mortgage interest plus property taxes plus charity must exceed it to matter.
The property tax deduction is capped as part of the state and local tax limit.
See our guide to property tax estimates for new buyers in Florida.
Run both ways each year.
Acquisition debt
The original purchase loan and any refinance of it up to the old balance.
See our guide to rate-and-term refinancing in Florida.
Cash taken out in a refinance is acquisition debt only if spent on the home.
Keep records of what cash-out funds paid for.
The lender does not track this for you.
Home equity debt
HELOC and home equity loan interest is deductible only when the funds improve the home.
See our guide to HELOC versus home equity loans in Florida.
Debt consolidation, tuition and cars do not qualify.
The combined limit still applies.
Mixed use requires allocating the interest.
Points
Points paid on a purchase loan are generally deductible in the year paid.
See our guide to mortgage points in Florida.
Points on a refinance are deducted over the life of the loan.
Seller-paid points may be deductible by the buyer.
The closing disclosure shows the amount.
Mortgage insurance
The deduction for mortgage insurance premiums has expired and returned several times.
See our guide to FHA mortgage insurance in Florida.
Check the current year's rules.
It phases out at higher incomes when available.
Do not assume it applies.
Second homes
Interest on one second home counts under the same limit.
See our guide to snowbird second home mortgages in Florida.
If you rent it, personal use days and rental days split the treatment.
Heavy rental use moves it to Schedule E.
The rules for mixed-use vacation homes are specific.
Rental properties
Interest on a rental is a business expense on Schedule E, not an itemised deduction.
See our guide to depreciation and rental property in Florida.
No loan limit applies.
It offsets rental income directly.
This is more valuable than the personal deduction for most investors.
Form 1098
Your servicer reports interest paid each January.
See our guide to mortgage servicers versus lenders in Florida.
A servicing transfer mid-year means two forms.
Check the total against your statements.
Points and insurance may appear on the form too.
The Florida angle
No state income tax means no state deduction to layer on.
The homestead exemption reduces property tax, which reduces the SALT deduction slightly.
See our guide to the Florida homestead exemption.
High insurance costs are not deductible on a primary residence.
The federal deduction is the whole picture here.
Reverse mortgages
Interest accrues but is not paid until the loan ends.
It is deductible when actually paid, subject to the limits.
See our guide to reverse mortgage requirements in Florida.
Heirs paying off the loan may have a deduction question.
Ask a tax professional at payoff.
Buying with someone else
Co-owners split the interest by what each actually paid.
See our guide to buying a home with a co-borrower in Florida.
Only the person on the 1098 receives the form; the other attaches an explanation.
Both must be liable on the loan or own the home.
Keep the payment records.
Timing your first year
A closing late in the year produces little interest to deduct.
Prepaid interest at closing counts for that year.
See our guide to prepaid interest in Florida.
The first full year is the largest deduction of the loan.
Amortisation shrinks it after that.
What the deduction is worth
Interest times your marginal rate, only on the amount above the standard deduction threshold.
For many Florida households it is worth less than they assume.
See our guide to how amortization works in Florida.
Do not choose a bigger loan for the deduction.
Choose the loan that fits and take the deduction if it applies.
A worked example
A household with a mid-sized loan, moderate property tax and no other itemised deductions.
Their total sits below the standard deduction; the mortgage interest changes nothing.
A household with a large jumbo loan and high taxes itemises and benefits.
The loan limit trims the benefit above $750,000.
The difference is size, not the rule.
Where to start
Pull last year's return and see whether you itemised.
Estimate the interest on the loan you are considering.
Then start a conversation about the loan and a tax professional about the return.