What are the limitations on deductibility of mortgage interest?
Generally, interest expense on the taxpayers primary residence and a second (but not a third) home is deductible. Interest is only deductible on the first $1,000,000 of the acquisition loan. As the loan is paid off the limit is reduced. In other words you can not refinance a loan for a higher amount than the current principal balance and increase the deduction. In addition interest on a home equity loan of up to $100,000 can be deducted.
