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If you itemize your deductions, you can deduct home mortgage interest on Schedule A of Form 1040. Qualified mortgage interest includes interest on a loan secured by your main home or second home. The loan can be a mortgage or a home equity loan.

In order for you to deduct the interest, though, you must be legally liable for the loan. So you cannot deduct the interest on someone else's mortgage, even if you've paid it. Only the person legally responsible for the mortgage can deduct it.

Other details: The mortgage used to buy the house can't exceed $1 million, and home equity debt can't exceed $100,000. There are a few more details that go into these calculations though, so you should consult the Publication 936 from the IRS for the rest of the rules.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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