A mortgage offers property owners the tax advantage of a mortgage interest tax deduction. The amount of deduction available depends in part on the type of loan involved.

Loans that are used to purchase, build, or improve a home fall into the category of home acquisition debt. For home acquisition debt up to $1 million, interest is fully deductible. Loans borrowed against home equity and used for purposes other than home purchase or improvement (such as paying off credit cards or paying for college) are considered home equity debt. For home equity debt up to $100,000, interest is fully deductible.

Some of the costs of obtaining or refinancing a mortgage may also be tax deductible. Points paid at purchase are one example. In the purchase of a primary home, points are usually deductible in the year of purchase. For a secondary home, deductible points are spread over the term of the loan. A further explanation of points is available in Publication 936 at www.irs.gov.

Finally, the mortgage-insurance deduction is available either in full or in part to those with adjusted gross income under $109,000.

In order to claim the mortgage interest tax deduction, taxpayers must file an itemized tax return, including Form 1040 and Schedule A. At the end of each year, the individual or business that holds a mortgage should provide a Form 1098, which lists the total amount of mortgage interest paid during the year. Instructions for completing Schedule A can be found at www.irs.gov.