Congress has now passed a sweeping tax bill that will affect almost every American. In addition to changing tax rates and deductions, these new rules affect a wide variety of personal and business activity.
In particular, the mortgage interest deduction has been significantly affected:
Mortgage Interest Deduction
- The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.
- Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
- The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
- Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
- The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes.
The National Association of Realtors® has compiled a summary of provisions of interest, which may be of relevance to you. Click here to check it out.