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  • 2018 Home Mortgage Interest

    Is your Mortgage Interest still deductible?  Yes and No

    The recent tax reform contains two big changes to how much you can deduct in mortgage interest for tax years 2018 through 2025:

    1. During this seven-year period, you may not deduct any interest on prior or current home equity debt, with certain exceptions.
    2. Also during this seven-year period, the maximum amount you may treat as acquisition debt for homes purchased after December 15, 2017, is $750,000.

    Exception alert. Your home equity loan may include acquisition or home-improvement debt, and that debt continues as deductible under the recent tax reform rules.

    Example. Billy took out a $90,000 home equity loan in 2015. He used $50,000 to remodel portions of his home and used the remaining $40,000 for his daughter’s college tuition. Billy’s total home mortgages never exceeded $1.1 million. Under the new law, Billy may deduct 5/9 of his home equity loan interest in 2018.

    Acquisition debt. When you buy your main home or a second home and take out mortgages secured by those homes, your mortgages are called acquisition debt. You can add acquisition debt when you improve your main or second home, and that new debt is secured by the home you improved.

    Refinancing alert. Your acquisition debt does not increase when you refinance unless you use the new monies to improve the home.


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