Home mortgage interest: Gimme a break

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In these days of tight government budgets, home ownership is one of the increasingly few income tax breaks still available for many people. With Arizona's recent renovation of its tax law, the homeowner deductions are even more important.

Generally, most homeowners can deduct fully the interest they pay on their home's mortgage. They can also take as an itemized deduction the property taxes they pay.

In addition, the "profit" or increase in value homeowners receive when they sell typically can be rolled over into a new home, deferring taxes for years into the future.

Mortgage interest can be deducted for a main and a second home, so that Mount Lemmon cottage counts as a tax break. Property taxes can be deducted for all properties (either built on or vacant land) that you own.

Interest deductibility rules changed in 1987, although that didn't affect most homeowners. Home mortgages obtained before Oct. 13, 1987, are fully deductible.

Mortgages - either new or refinanced - taken out after that date can be deducted for up to $1 million to buy, build or improve the home. Home equity loans up to $100,000 borrowed since then can be deducted as home interest. Some limits apply, however, if the total amounts borrowed exceed the value of the home.

Interest and other expenses for investment real estate follow different rules but generally are fully deductible, too.