You can deduct the interest portion of your mortgage payments whether the loan is for residential or business purposes. There are limits for home mortgage interest, however.
Currently, only the interest on $1,000,000 worth of home mortgage debt is deductible. Fortunately, most of us do not need to worry about this problem.
Home equity line of credit interest is deductible on only $100,000 worth of debt. You can have more debt than that, but you can only deduct the interest on the first $100,000 portion.
Second home interest is also deductible. However, your combined mortgage debt is limited to that $1,000,000 ceiling.
You can read more information on deducting mortgage payments in IRS Publication 936, “Home Mortgage Interest Deduction.” For more information on the mechanics and details of homeownership deductions in general, refer to IRS Publication 530, “Tax Information For First-Time Homeowners.”
You can download these from the Web at www.irs.gov/publications, or you can call 800-TAX-FORM.