The Tax Cuts and Jobs Act represents the most significant overhaul to the U.S. Americans are wanting to know which taxes breaks they’ll be able to use in 2018, and those have been removed or will no longer be useful. Probably one of the most popular and lucrative tax breaks has been the deduction for mortgage interest, and while tax reform didn’t get rid of the deduction, it did modify it.
Plus, thanks to other areas of the new tax code, millions of Americans who pay mortgage interest might not be able to use the deduction. Image source: Getty Images. The Taxes Slashes and Careers Take action held the most used taxes deductions broadly, such as home loan interest, in place for 2018 and beyond. However, a few of these popular deductions have been somewhat altered, and in unfavorable ways for taxpayers. The mortgage interest deduction is one of these. It’s worth directing out that this limit only pertains to new loans originated after 2017. Preexisting home loans are grandfathered into the old limitations.
For the purposes of the mortgage interest deduction, a “qualified home” means the taxpayer’s principal residence or second home (no investment property). Additionally, the loan amount for which interest is deducted cannot exceed the cost of the true home. Like the majority of the tax changes that affect individuals, the revisions to the mortgage-interest deduction are set to expire after the 2025 tax year.
- Be positioned in a higher demand location (major city or town with more than 10,000 people)
- You may be liable for injuries
- ▼ 2009 (12) – ▼ December (2) Recent and Projected Federal Outlays and Their Rol
- 283 Intel Corporation (NASDAQ:INTC) -53.2% 12.49 26.66
- Initial term expires 9/30/2023
100,000 of the main, but this won’t necessarily mean that you can’t deduct home-collateral loan interest at all anymore. The deductibility of home equity interest depends on what the home equity loan was used for. If the home equity loan was used to improve the taxpayer’s home, the interest continues to be deductible, subject to the limits discussed in the previous section.
On the other hands, if the true home collateral loan was used to hide personal expenses, it is much longer deductible no. Here’s why. Although the home-collateral interest deduction away has technically eliminated, if the loan was used to significantly improve your home, it becomes a “qualified home loan” under the IRS’s interpretation of the new tax law. In the event that you put significantly less than 20% down when buying your home, you most have to pay private home loan insurance likely, or PMI. The deduction for PMI has been established to expire several times and has been prolonged by Congress each time. And 2018 is no exception.
As of early February, the “tax extenders” package, which contains the PMI deduction along with many others, is usually to be renewed yet. It will probably be approved eventually (and retroactively), but it is important to realize it was not made official yet. Approved Once, the PMI deduction essentially gives you to take care of your mortgage insurance premiums as interest for taxes purposes.