New Ruling Increases Limit on Home Mortgage Interest Deduction
In the example case cited by the IRS, the taxpayers had a loan of $1.2 million which had been used to purchase their principal residence. Interest on the first $1 million is deductible mortgage interest and interest on the next $100,000 is deductible as home equity interest. Interest on the remaining $100,000 of debt used to acquire the home remains non-deductible.
Rev. Rul. 2010-25 is attached.
http://www.irs.gov/pub/irs-drop/rr-2010-25.pdf