Publication 936 - Home Mortgage Interest Deduction

as personal interest and is not deductible. But if

balance on the mortgage before you borrowed

Enter the balance as of the first

the proceeds of the loan were used for invest-

the additional amounts is grandfathered debt.

day of the year that the

ment, business, or other deductible purposes,

The newly borrowed amounts are not

mortgage was secured by your

the interest may be deductible. If it is, see the

qualified home during the year

grandfathered debt because the funds were bor-

Table 1 Instructions for line 13 for an explanation

(generally January 1) . . . . . .

rowed after October 13, 1987. See

Average

of how to allocate the excess interest.

Mortgage Balance

in the Table 1 Instructions

Enter the balance as of the last

Part of home not a qualified home. To

day of the year that the

that follow.

figure the limit on your home equity debt, you

mortgage was secured by your

must divide the FMV of your home between the

Table 1 Instructions

qualified home during the year

(generally December 31) . . . .

part that is a qualified home and any part that is

not a qualified home. See

Divided use of your

Unless you are subject to the overall limit on

Add amounts on lines 1 and 2

home

under Qualified Home in Part I.

itemized deductions, you can deduct all of the

Divide the amount on line 3 by

Fair market value (FMV). This is the price

interest you paid during the year on mortgages

2. Enter the result . . . . . . . . .

at which the home would change hands be-

secured by your main home or second home in

tween you and a buyer, neither having to sell or

either of the following two situations.

Interest paid divided by interest rate method.

buy, and both having reasonable knowledge of

•

All the mortgages are grandfathered debt.

You can use this method if at all times in 2011

all relevant facts. Sales of similar homes in your

•

the mortgage was secured by your qualified

area, on about the same date your last debt was

The total of the mortgage balances for the

home and the interest was paid at least monthly.

secured by the home, may be helpful in figuring

entire year is within the limits discussed

the FMV.

earlier under

Home Acquisition Debt

and

Complete the following worksheet to

figure your average balance.

Home Equity

Debt.

Grandfathered Debt

In either of those cases, you do not need Table

If you took out a mortgage on your home before

1. Otherwise, you can use Table 1 to determine

October 14, 1987, or you refinanced such a

your qualified loan limit and deductible home

mortgage, it may qualify as grandfathered debt.

mortgage interest.

Enter the interest paid in 2011.

To qualify, it must have been secured by your

Do not include points, mortgage

qualified home on October 13, 1987, and at all

insurance premiums, or any

Fill out only one Table 1 for both your

times after that date. How you used the pro-

interest paid in 2011 that is for a

TIP

main and second home regardless of

ceeds does not matter.

year after 2011. However, do

how many mortgages you have.

Grandfathered debt is not limited. All of the

include interest that is for 2011

but was paid in an earlier year

interest you paid on grandfathered debt is fully

Home equity debt only. If all of your mort-

deductible home mortgage interest. However,

Enter the annual interest rate on

the amount of your grandfathered debt reduces

gages are home equity debt, do not fill in lines 1

the mortgage. If the interest rate

the $1 million limit for home acquisition debt and

through 5. Enter zero on line 6 and complete the

varied in 2011, use the lowest

the limit based on your home’s fair market value

rate for the year . . . . . . . . . . .

rest of Table 1.

for home equity debt.

Divide the amount on line 1 by

the amount on line 2. Enter the

Refinanced grandfathered debt. If you refi-

Average Mortgage Balance

result . . . . . . . . . . . . . . . . . .

nanced grandfathered debt after October 13,

1987, for an amount that was not more than the

You have to figure the average balance of each

mortgage principal left on the debt, then you still

Example. Mr. Blue had a line of credit se-

mortgage to determine your qualified loan limit.

treat it as grandfathered debt. To the extent the

cured by his main home all year. He paid interest

You need these amounts to complete lines 1, 2,

new debt is more than that mortgage principal, it

of $2,500 on this loan. The interest rate on the

and 9 of Table 1. You can use the highest

is treated as home acquisition or home equity

loan was 9% (.09) all year. His average balance

mortgage balances during the year, but you may

debt, and the mortgage is a mixed-use mort-

using this method is $27,778, figured as follows.

benefit most by using the average balances.

gage (discussed later under

Average Mortgage

The following are methods you can use to figure

Balance

in the Table 1 instructions). The debt

Enter the interest paid in 2011.

your average mortgage balances. However, if a

must be secured by the qualified home.

Do not include points,

mortgage insurance premiums,

mortgage has more than one category of debt,

You treat grandfathered debt that was refi-

or any interest paid in 2011 that

nanced after October 13, 1987, as

see

Mixed-use

mortgages, later, in this section.

is for a year after 2011.

grandfathered debt only for the term left on the

However, do include interest

debt that was refinanced. After that, you treat it

that is for 2011 but was paid in

Average of first and last balance method.

as home acquisition debt or home equity debt,

an earlier year . . . . . . . . . . .

$2,500

You can use this method if all the following

depending on how you used the proceeds.

Enter the annual interest rate

apply.

Exception. If the debt before refinancing

on the mortgage. If the interest

•

rate varied in 2011, use the

was like a balloon note (the principal on the debt

You did not borrow any new amounts on

lowest rate for the year . . . . .

.09

was not amortized over the term of the debt),

the mortgage during the year. (This does

Divide the amount on line 1 by

then you treat the refinanced debt as

not include borrowing the original mort-

the amount on line 2. Enter the

grandfathered debt for the term of the first refi-

gage amount.)

result . . . . . . . . . . . . . . . . . $27,778

nancing. This term cannot be more than 30

•

You did not prepay more than one month’s

years.

principal during the year. (This includes

Statements provided by your lender. If you

Example. Chester took out a $200,000 first

prepayment by refinancing your home or

receive monthly statements showing the closing

mortgage on his home in 1986. The mortgage

by applying proceeds from its sale.)

balance or the average balance for the month,

was a five-year balloon note and the entire bal-

•

you can use either to figure your average bal-

You had to make level payments at fixed

ance on the note was due in 1991. Chester

ance for the year. You can treat the balance as

equal intervals on at least a semi-annual

refinanced the debt in 1991 with a new 20-year

zero for any month the mortgage was not se-

basis. You treat your payments as level

mortgage. The refinanced debt is treated as

cured by your qualified home.

grandfathered debt for its entire term (20 years).

even if they were adjusted from time to

For each mortgage, figure your average bal-

time because of changes in the interest

ance by adding your monthly closing or average

Line-of-credit mortgage.

If you had a

rate.

balances and dividing that total by the number of

line-of-credit mortgage on October 13, 1987,

months the home secured by that mortgage was

and borrowed additional amounts against it after

To figure your average balance, com-

a qualified home during the year.

that date, then the additional amounts are either

plete the following worksheet.

home acquisition debt or home equity debt de-

If your lender can give you your average

pending on how you used the proceeds. The

balance for the year, you can use that amount.

Page 10

Publication 936 (2011)

Publication 936 - Home Mortgage Interest Deduction - 2011 Page 10

Related Articles

Related forms

Related Categories