Do You Get All Your Interest on Your Mortgage Back on Taxes?

You can claim the deduction on a first home -- the one you treat as your primary residence -- and a vacation home. If you have multiple vacation homes, you can only claim the deduction for one of them. When you rent out your second home, you have to use it yourself at least 14 days a year or 10 percent of the period it's rented out, whichever is greater. You can't take the mortgage-interest deduction if you fall short, though you can write off mortgage interest as a rental expense.

The points you pay at closing may be prepaid interest on the loan, lender fees such as appraisal costs or both. You can deduct the prepaid interest points in the year you close, provided that points are standard practice in your community. You cannot, however, deduct more points than lenders usually charge home buyers: If the norm is one point, taking five for a big tax deduction is a no-go with the IRS. Even if the seller pays the points to sweeten the deal, you can still take the deduction.

You can deduct interest on up to $1 million in mortgage debt. If you have $600,000 on your vacation home and $500,000 on your primary home, the interest on the $100,000 above the cut-off isn't deductible. If you use some of the excess loan to pay for home improvements, however, you may be able to write it off as interest on a home-equity debt. IRS publication 936 details exactly when home-equity debt qualifies for a deduction.

When you pay more than $600 in interest during the year, your mortgage lender sends you a 1098 form stating the total mortgage amount. With multiple mortgages, you get one 1098 for each mortgage. If you take the mortgage interest deduction, report the totals from your 1098s, plus any mortgage payments that weren't included. Attach an explanation to your Schedule A along with the 1098, detailing why you're claiming more than what's on the form.