global Tax Is Home Mortgage Interest Deductible? December 20, 2022 Can you deduct interest you pay on your home? Find out here. December 2017’s Tax Cuts and Jobs Act (“TCJA”) retained the home mortgage interest deduction with modifications from tax years prior to 2018. Read on to see how your individual situation changed under the TCJA. What counts as mortgage interest? Mortgage interest is any interest you pay on a loan for your main home or second home. These loans include: A mortgage to buy your homeA second mortgageA line of creditA home equity loan What is the home mortgage interest deduction? For debt secured after October 13, 1987 and prior to December 16, 2017, you could deduct interest on up to a total of $1 million of mortgage debt used to acquire your principle residence and a second home (acquisition debt). For married taxpayers filing separately the limit was $500,000. You could also deduct interest on other debt secured by the qualifying homes, i.e., home equity debt (limited to the lesser of $100,000) or the taxpayer’s equity in the home(s). Modifications under the TCJA At the beginning of 2018, the limit on qualifying acquisition debt was reduced to $750,000 for married filing jointly, and $375,000 for married filing separately.Do the pre-Act rules apply to any previous debt? Yes, for acquisition debt incurred before December 15th, 2017 the higher pre-Act limit ($1 million) applies. It also applies to debt arising from refinancing pre-December 15th acquisition debt. Essentially you can refinance up to $1 million of “pre-December 15” acquisition debt in the future without worrying about being subject to the reduced limit.Also, at the start of 2018, the deduction for interest on home equity debt is available only if the loan was used for home improvements. If the home equity loan is used to pay off credit card debt or an automobile loan, you cannot claim the deduction. Is there a mortgage interest limitation on a rental property? No, the limit does not apply to rental activity. The limitation only impacts primary or secondary homes. How long will these changes last? The changes are effective until 2025. The pre-Act rules are scheduled to come back into effect in 2026. Please reach out to us for assistance in applying these changes.