Tax season isn’t fun for a lot of people, with all of the collecting receipts and writing checks to the government. For many homeowners, though, there is some relief. In certain circumstances, homeowners can deduct their mortgage interest from their taxable income, saving some money.
This includes all of the interest that you pay on a loan for a primary or secondary home, including a mortgage, second mortgage, and some home equity loans or HELOC lines of credit.
There Are Two Qualifications for this Mortgage Interest Deduction.
You must file an IRS form 1040 and itemize deductions, and the mortgage must be a secured debt on a home that they own.
Starting in 2018, There Were Some Changes to the Mortgage Interest Deduction Tax Rules.
The limits on qualified residence loans were lowered in 2018. From then forward, couples filing jointly were only able to deduct interest on up to $750,000 of qualified home loans, which had been set at $1 million through 2017.
If married couples are filing separately the limit is $375,000, down from $500,000. The limits include any grouping of qualified loans, including mortgages, home equity loans and HELOCs.
So, if you have a first mortgage that’s $200,000, and a HELOC of $75,000, any interest that you pay on these loans is deductible, since it doesn’t exceed $750,000.
Mortgages and HELOC/home equity loans taken out before December 15, 2017 still qualify up to $1 million.
Mortgage interest deductions on HELOCs are now severely limited, with the interest only deductible on funds used for home improvements until 2026. If you are not using the loans to fix your basement, add a pool or new bedroom, or make an upgrade to your home, it won’t be deductible.
Even if you are using it for that purpose, keep VERY good records, as you will have to prove that the spending was on home improvements in case of an audit.
How Much Mortgage Interest Can Be Claimed?
Most of you will be able to deduct all of your mortgage interest. After the Tax Cuts and Jobs Act went into effect in 2018, you can deduct interest on home loans up to $750,000 that are used to buy or improve a first or second residence.
Any mortgage taken out before December 16, 2017 has the previous higher limits of $1 million (or $500,000 filed separately) still applied, including loans that were under binding contract on or before December 16, 2017 and were closed prior to April 1, 2018.
This applies to the vast majority of homeowners.
Call The Home Loan Expert Team at 800-991-6494. You can always apply online at hero.loan for your VA Loan, and www.thehomeloanexpert.com for your other mortgage needs, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?
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