Small Business Taxes & Management


Mortgage Interest Deduction


Small Business Taxes & ManagementTM--Copyright 2019, A/N Group, Inc.


Mortgage Interest Deduction

__ Principal and second residence requirement
__ $1,000,000 debt limit; married filing separate ($500,000); for 2018 and subsequent years only for acquisition debt incurred prior to 12/15/2017
__ $750,000 ($375,000 married filing separate) debt limit on debt incurred on or after 12/15/2017 for 2018 and subsequent years.
__ Home equity interest not deductible beginning with 2018 taxable year
__ Refinanced pre-12/15/2017 debt $1,000,000 limit applies
__ Debt limit per individual not per property
__ Fair market value of home limit for all qualified debt; qualified portion only
__ Secured by residence
__ Mortgage recorded
__ Refinancing deductible amount limited to remaining original loan (improvement exception)
__ Costs of refinancing added to loan
__ Deductible points (original loan only)
__ Amortizable points (second home; refinancing; life of loan; new lender)
__ Refinancing with same lender
__ Legal ownership/benefits and burdens
__ Obligation to make payments
__ Community property
__ 14 days/10% rule for rented property (second home)
__ Accrued interest not currently deductible
__ Unamortized points deductible on refinancing
__ Qualified portion of home (residence portion)
__ Qualified as other debt, e.g., investment interest, business interest
__ Seller financed debt, special 1040 reporting requirements
__ Construction period (24 months)
__ Occupancy rule
__ Late payment penalty as interest (not for specific service)
__ Prepayment penalty deductible as interest
__ Interest payment as alimony
__ Qualifying second home (kitchen and bath; RV, boat)
__ Cost of improvements
__ Selection of qualifying home (if multiple homes owned)
__ Tracing of mortgage proceeds
__ Disclaiming mortgage interest deduction
__ Prepaid interest
__ Casualty loss rules
__ Interest deductible up to not including date of sale
__ 90 day/24 month rule for use of mortgage proceeds
__ Mortgage debt forgiveness; insolvency; bankruptcy
__ Adequate interest on seller financed debt
__ Alternative minimum tax (AMT) add back for home equity loan (tax years prior to 2018)
__ Election not to claim interest on home
__ Part of home rented or used for business; safe harbor election for business use
__ Definition of points
     ___Main (deductible) vs. second (amortizable) home
     ___Established practice
     ___Not more than generally charged in that area
     ___Not in place of amounts ordinarily separated stated such as appraisal fees
     ___Funds provided before closing at least as much as points
     ___Loan used to buy or build home
     ___Computed as percentage of principal amount of mortgage
     ___Amount clearly shown on settlement statement
__ Points paid by seller
__ Refunded interest
__ Mortgage insurance premiums (check current law; )
__ Spousal buyout
__ Wraparound mortgage

Copyright 2019 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536

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--Last Update 02/12/19