How Changes To The Mortgage Interest Deduction May Affect You

Americans have been keeping a very close eye on the newest tax bill and how it’s going to impact their financial portfolios. If you currently own a home or are thinking of buying one in the near future, it’s important for you to pay extra close attention to new mortgage interest deduction reforms. Starting in 2018, the only types of home mortgage interest that will be liable for tax deduction is interest up to approximately $750,000 of loan proceeds used to build, buy or improve a qualified home. Listed below are five different ways this new change can affect your home loan strategy:

Debt Consolidation – Interest earned on “cash out” proceeds or home equity loans which are then used to pay off other debt (and not for home improvement) will no longer be tax deductible.

Vacation Homes – It’s not recommended to use a “cash out” mortgage or home equity line of credit from your primary home to go out and buy a vacation home. Instead, it’s recommended you place a new mortgage on the vacation home when you buy it. This can then be treated as “acquisition indebtedness” on your taxes.

Home Improvement – If you plan to use the interest earned on a “cash out” mortgage or home equity line of credit for home improvement, it’s generally still deductible. However, there are still certain rules, regulations and timelines which need to be followed.

Refinancing “Acquisition” Mortgages Closed on or Before December 15, 2017 – If you refinance an older loan which was used to build, buy or improve your home, you shouldn’t have to worry about losing your tax deduction.

Refinancing “Acquisition” Mortgages Closed After December 15, 2017 – Interest on your new home loan might still be deductible on balances up to $750,000 if the balance remains the same as the older loan’s balance.

Consider speaking with a CPA in your area to learn more about how all of these changes could impact your individual financial situation. Lots of new rules are associated with this new mortgage

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