Mortgage Interest Deduction Changes

Mortgage Interest Deduction Changes

A few changes in the principal residence and second home Mortgage Interest Deduction rules.

Mortgage Interest Deduction is used to reduce your income tax liability.

For mortgages originated after December 14, 2017, interest on the first $750,000 of mortgage qualifies for the Mortgage Interest Deduction.

For loans originated prior to December 14, 2017, interest on the first $1,000,000 of mortgage qualifies for the Mortgage Interest Deduction.

Homeowners who wish to take the Mortgage Interest Deduction on the interest paid on their Home Equity Line of Credit (HELOC) are more limited now as well.

To qualify to take the Mortgage Loan Deduction in 2018, the home equity mortgage needs to be used to substantially improve the residence securing the Home Equity Line of Credit. The Home Equity Line must be used to fund improvements that add to the property’s market value, extend the property’s useful life, or used to remodel the property to residential use.

If the Home Equity Line is used for other purposes such as college tuition, vacation or personal item purchase, the interest is no longer deductible.

I summarized the above information from the article titled Mortgage Interest Deduction Changes in 2018 (follow link for full article). This article was published on February 28, 2018 in the ft Journal (First Tuesday).