is it true interest on mortgages not deductible

I'm not sure where you are getting that from. There was a proposal at some point from Obama to limit the marginal rate at which mtge interest could be deducted to 28% for those w/incomes over a certain amount. Perhaps that is what you are talking about.

Right now, you can deduct interest up to $1 million dollars in loan amount(s). It can be one loan for up to that amount, or two loans (if the second loan is for a "second residence", and the total loan amount for both, is no more than $1 million). If that changes or not after 2010 remains to be seen. But yes, there are rumblings that mortgage interest deductions could be taken off the table--That will be a political process unto itself.....

what about if a mortgage was for $1.25 million. Would the interest on the $1.0 million be tax deductible (and the interest for the incremantal piece not be tax deductible)?

bk3525, that is correct

don't forget about the AMT.
if you paying the AMT, for every dollar you save on the deduction gets added back into the AMT - giving you a 0 net gain.
this is the situation i am in.

Mortgage interest is actually free and clear of the AMT. Mortgage interest, and charitable contributions I believe, are the only two items allowable and that don't get caught in the AMT.

you need a new accountant bigmovie

bigmoviebuff, perhaps you're thinking of the real estate tax part of your deduction.

My friend with the MBA in Accounting told me the mortgage tax break is the biggest 'entitlement' the government gives away - bigger than the ones people complain about. And it mostly goes to the upper income groups.