Owning a home in the United States has long been a huge boon come tax time due to the availability of a mortgage interest deduction on the interest expenses charged on your loan. The Tax Cuts and Jobs Act of 2018 had significant changes to the overall tax structures for Americans, which will have an impact on how many filers are using the mortgage interest deduction.
This article will help readers understand these tax changes and the impact that it will have on the mortgage interest deduction.
Changes to the Mortgage Interest Deduction
Writing off the interest paid on mortgage loans as part of filing your taxes has always been one of the biggest benefits of homeownership. Essentially you can claim a mortgage interest deduction on your tax return for any expenses related to the interest paid on your mortgage. This has not changed; however there are some key nuances related to the deduction limits and standard deductions, including the following:
- The first change is that the deduction limit on your mortgage has been lowered from 1 million dollars to $750,000.
- The standard deduction has been doubled to $12,000 for individuals and $24,000 for married families.
- Finally, the deduction for home equity debt has been removed, as it was previously capped at $100,000.
- These changes only apply to homes purchased after December 15th, 2017.
While not directly affecting your ability to write-off the mortgage interest, it is highly plausible that homeowners in lower- and middle-income groups will not need the deduction at all. With the standard deduction being doubled, it’s likely that you will simply apply that amount and move on with your taxes. Overall many tax professionals and financial investors are watching, and it will be very interesting to see if the mortgage interest deduction has the impact it did in years past.
Can I Deduct Mortgage Interest?
Mortgage interest deductions are applicable for any interest you incur from properties you own, most notably your primary residence. You may take mortgage interest deductions on vacation properties and secondary homes, but there are special situations that you might want to consider. Your “home” can include a house, condo, boat, or mobile home. As the primary owner of the property, you can take advantage of these interest deductions when filing your taxes.
Can You Write off Property Taxes?
The property tax deduction is now limited to $10,000 combined with your state and local taxes. (This is what is known as “SALT” or “State and local taxes”) This is a big deal for those who pay above $10,000 in annual property taxes because that cost could be offset by tax deductions in years past.
Also, if you have a higher income and pay more in State and local taxes on your income, this could have a negative impact on your mortgage deduction on your taxes.
Can Tax Credits be Used for a Mortgage?
There are certain scenarios at the State and local level when individuals can receive a “credit” on the mortgage costs for their home. If you are eligible for a mortgage tax credit, you will receive a certificate from your local agency or state agency that will be needed when you file. Typically, most US tax filers apply mortgage interest deductions vs. tax credits on their mortgage.
How to Claim a Mortgage Interest Tax Deduction
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We also do the math and fill in all the right tax forms. The online software will help you claim every homeowner deduction you qualify for.
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