Home mortgage interest deduction.

• Position: News & trends

According to the FTB, audits of tax returns with large home mortgage interest deductions indicate that many taxpayers and tax practitioners are not complying with the rules regarding debt limitations on the deductibility of home mortgage interest.

Home mortgage interest deduction is governed under IRC Sec. 163.

To fully deduct the home mortgage interest, the interest must be paid on acquisition or equity debt. The aggregate amount treated as acquisition debt for any period shall not exceed $1 million or $500,000 in the case of a married individual filing a separate return. The maximum aggregate amount of home equity debt for any period is $100,000, or $50,000 in the case of a married individual filing a separate return.

Therefore, the aggregate amount of the...