What Is the 163(h) Deduction?
The "163(h) deduction" refers to Section 163(h) of the Internal Revenue Code, which governs the deductibility of personal interest — and, importantly, allows a deduction for "qualified residence interest," better known as the home mortgage interest deduction. While § 163(h) generally disallows deducting personal interest, it carves out an exception for interest on a qualifying home loan.
What Qualifies
- Acquisition debt — a mortgage used to buy, build, or substantially improve a main or second home, secured by that home
- Subject to a debt limit set by federal law (which has changed over time)
- The home must secure the loan, and the taxpayer must itemize deductions to claim it
Why It Matters for Florida Homeowners
The mortgage interest deduction is one of the most significant tax benefits of homeownership, and § 163(h) is its source. Because Florida has no state income tax, the benefit is realized entirely at the federal level. The rules — including the deductible debt limit and the treatment of home-equity interest — are set by Congress and have changed in recent years, so homeowners should confirm current limits with a tax professional before relying on the deduction.
Related Terms
- Title 26 U.S.C. — The Internal Revenue Code, where § 163(h) lives
- Mortgage — The loan whose interest may be deductible
- Refinance — Can affect how the deduction applies
Barnes Walker
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Federal Law Reference
26 U.S.C. § 163(h)
Governs the deduction of personal interest and allows a deduction for qualified residence (home mortgage) interest within federal debt limits, claimed by taxpayers who itemize.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC