Qualifying for the Mortgage Interest Deduction. Mortgage interest includes that which you pay on loans to buy a home, on home equity lines of credit and on construction loans. The deduction is limited to interest paid on your main home and/or a second home. Interest paid on a third or fourth homes isn't deductible.
The statute of limitations on how far back the IRS can audit (called the Assessment Statute Expiration Date or ASED) varies depending upon the circumstances of the tax return. In most cases the IRS will not go back more than 3 years unless there is something very wrong with the tax return that was filed.
Ultimately, taxpayers should know the IRS has three years from the date a return is filed to conduct an audit, but only if it suspects good-faith errors. The IRS has up to six years to challenge a return if the agency believes a taxpayer under reported income by at least 25 percent.