Tax reform: will I lose my mortgage interest deduction

Your Guide to State, Local, Federal, Estate + International Taxation

mortgage interest, deduction, tax, tax reformI have received this question from friends, family and clients a lot recently. Like many Americans, you are probably asking if you will be able to continue to deduct your mortgage interest.

As with all tax questions, the answer is it depends. TCJA applies for tax years 2018 through 2025. In 2026, the pre-Act rules return. Here is what you will need to know regarding the mortgage interest deductibility for the next eight years:

  • Taxpayers with a mortgage on business property, including rental property, can deduct the interest as a regular business expense against the business income generated by the property.
  • Married filing jointly taxpayers with existing mortgages will be able to continue to deduct the interest on a total of $1 million of acquisition debt for a first and second home. Acquisition debt is mortgage debt used to acquire, build or substantially improve the residence. This includes refinanced existing acquisition debt, provided that the debt resulting from the refinancing does not exceed the original debt amount.
  • New home buyers with acquisitions incurred after December 15, 2017 will be limited to deducting interest on $750,000 of mortgage debt for married filing jointly.
  • Married filing separate taxpayers have a debt limit of $500,000 for pre-December 15, 2017 acquisitions and $375,000 for post-December 15, 2017 acquisitions.
  • The deductibility of interest on home equity loans could be suspended through 2025. This applies to home equity debt, regardless of when the debt incurred. However, please note that home equity debt has a different definition for this tax purpose than from a banking perspective or definition.

Reminder, please consult your tax advisor to determine how the changes from TCJA will affect your specific situation.

Kimberly Hughes, CPA