For both regular tax and AMT computations, interest paid on a debt to acquire or substantially improve a first or second home is deductible as long as it does not exceed the debt limit (generally $1 million). This is also true of refinanced debt, except that any increase in debt is treated as equity debt. For regular tax purposes, the interest on up to $100,000 of equity debt on the first two homes can also be deducted.
When itemizing deductions, a taxpayer is allowed to deduct a variety of taxes, including real or personal property taxes and state income or sales taxes. However, for alternative minimum tax (AMT) purposes, none of these itemized taxes is deductible. For most taxpayers, taxes represents one of the largest tax deductions, and it frequently triggers the AMT.