Mortgage

• If you're taking over your parents' mortgage payments to keep them from losing the house, that's a generous act, but it doesn't entitle you to deduct the interest. If you bought the house, or they're living in one you already own, the interest may be deductible. The interest must be on a loan secured by the house, meaning that if you stop paying the mortgage, the lender can foreclose.
  
  

Qualifying Home

• You can only claim the deduction on two homes in any given tax year. One is your personal residence, the other is a second home that isn't a rental property, or primarily a rental property. If you own added homes, you can't deduct mortgage interest, unless it's as a business expense for a rental property. If you use, for example, 10 percent of your parents' house for business, you have to reduce your mortgage interest deduction by 10 percent and claim the 10 percent as a business expense.
  
  

Limits

• If you took out a mortgage worth more than the purchase price, you can't deduct interest on the excess amount of the mortgage. The maximum total debt you can claim interest on, as of 2011, is $1 million for your primary and second home, or $500,000 if you're married but filing separately. If you take out a secured loan, such as a second mortgage, to make substantial improvements to your home, you can deduct that interest, too, up to the maximum limit.
  
  

Itemizing

• If you own your parents' home and the mortgage debt meets all the other qualifications, you can claim the interest, provided that you itemize your deductions. You report all itemized deductions, such as medical expenses, state income taxes and the mortgage-interest deduction, on Schedule A of your tax return. Your lender should report the total deductible interest to you on Form 1098. If you and your parents co-own the house and they paid part of the mortgage, you will have to calculate how much interest each of you can claim.