How Does the New Mortgage Interest Deduction Affect You?
The Tax Cuts and Jobs Act of 2017 enacted on December 22, 2017 suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless you used the money to buy, build or substantially improve the taxpayer's home that secures the loan. Many of you may have received solicitations to consolidate your debts with a home equity loan thinking you could deduct the interest (on loans up to $100,000) as in prior years. Beware of the temptation to obtain a home equity loan to pay off your credit card debt or personal living expenses because the interest is no longer deductible on your federal tax return.
There is a new dollar limit on total qualified residence loan balances. In 2018, Americans will be able to deduct interest they pay on mortgages up to $750,000 in new mortgage debt. Anyone who purchased a home before December 15, 2017 will be able to still deduct mortgage interest payments on up to $1 million in debt up until 2025.
There is a silver lining because California have not conformed to the new federal tax laws. For California the taxpayer can still deduct mortgage interest on mortgage loans up to $1 million and home equity loans (regardless of how the money was used) up to $100,000.
The new tax laws are very complicated. If you would like more information about the changes to the home mortgage interest rules or to discuss your tax situation, Cheryl A. Fox is available for a consultation. She has almost 40 years experience and can be reached at 818-995-9109.