US Mortgage Interest Deduction - Two Kinds of Debt

Under the current US tax system, there are two different kinds of debt:

•Money borrowed to buy, build or substantially improve a primary residence is called "acquisition indebtedness."

•Money borrowed against the equity in a home, or money loaned to refinance a home for any reason except home improvement, is called "equity indebtedness."

One can deduct mortgage interest paid on acquisition indebtedness up to a total of $1.0 million. The equity indebtedness limit is $100,000. One can borrow up to $100,000 of the equity in a home and use it for any purpose. Both of these amounts are totaled and the resulting $1,100,000 times the mortgage interest rate found in the Geographic Assessor databases (either the default or subscriber input) is the maximum value used to calculate interest eligible for either state or federal income tax deduction.