Which of the following is deductible on a federal income tax return?

• A. The interest paid on the mortgage
• B. The principal payments on the mortgage
• C. The down payment
• D. The appraiser fee

Answer: (A)

The deductible item is the mortgage interest you pay, because mortgage interest is allowed as an itemized deduction on your federal return when you itemize on Schedule A. This deduction applies to the interest portion of your mortgage payments, not the principal you’re paying down. The principal payments reduce the loan balance and are not deductible. The down payment is part of the purchase price, not a deductible expense. Appraiser fees are not deductible for a personal residence on a federal return (they’re closing costs rather than an income tax deduction). So mortgage interest stands out as the allowable deduction.