The new tax law has many people worried that they might lose their mortgage interest deduction. For the vast majority of homeowners, the new law will have virtually no impact on their tax returns.
The mortgage interest deduction is now limited to home acquisition debt of $750,000 for mortgage debt incurred December 15, 2017 or later. The pre-Tax Cuts & Jobs Act (TCJA) limitation of $1 million applies to earlier home acquisition debt. As under prior law, the debt must be incurred to acquire the taxpayer’s main or second home.
Qualified mortgage debt no longer includes home equity indebtedness. This means home equity loans. However, if the proceeds of a home equity loan are used to substantially improve a home, such as adding a room, the loan will be considered acquisition debt.
For most homeowners, their interest deduction will remain a valuable part of their itemized deductions. If you have any questions feel free to contact us at (801) 210-1553.