Debt secured by a taxpayer’s home is by definition home mortgage interest and to the extent it is allowed as home mortgage interest, it CANNOT BE ALLOCATED. However, the EXCESS (the amount not allowed as home mortgage interest), as discussed earlier, can be allocated to other uses per the general interest allocation rules. As an alternative, the taxpayer has the option to treat the mortgage as not secured by the home (see “Election to Treat Secured Debt as Unsecured”).

Where there is business use of a home, the acquisition debt is secured by both the home and the office in the same ratio as the home and business use and is not being allocated. Therefore, the interest paid on the portion of the loan secured by the office becomes home office interest, deductible on the same form or schedule on which the office is deducted, and is not treated as allocated interest secured by the home.