This tax season there has been a misconception that the mortgage interest deduction is capped or was eliminated. In fact, following the Tax Cuts and Jobs Act, taxpayers can deduct home mortgage interest on the first $750,000 of home acquisition indebtedness on mortgages originated after 12/15/17. In addition, mortgage interest paid on loans that were not used to buy, build or improve the home are no longer deductible as Home Mortgage Interest.
In the past, taxpayers were able deduct home mortgage interest on the first $1,000,000 and were able to deduct interest on up to $100,000 of home equity for any purpose.
Now, mortgage interest on home acquisition indebtedness is still deductible up to the limits in place when the mortgage was originated with no cap. However, the interest on the loans used for any “non-home debt” is no longer tax deductible.
To calculate the deductible amount, you must separate the Home Acquisition Debt from the Home Equity Debt (not used to buy, build, or improve home). It is important to provide your tax professional with all the necessary information so that the allowed deductible interest can be calculated correctly.