Mortgage Interest Deduction : Rooftop Views

Rooftop Views

Mortgage Interest Deduction

Saul Klein is one of the founders of Internet Crusade, a helping hand for internet challenged real estate professionals. He is also a tax accountant and financial planner. This is a recent email he sent out and we reprint it here with permission.

Mortgage Interest Deduction - Are your clients entitled to the deduction they are taking?

Current Law: In order to take mortgage interest deductions (MID), taxpayers must comply with the following rules, where applicable.

1.Debt on a principal residence and a second home, combined, may not exceed $1 million. (If mortgage debt exceeds $1 million, interest on the increment above $1 million is not deductible.)

2.Debt on home equity loans (or lines of credit) may not exceed $100,000.

3.All debt (mortgage debt and home equity debt) must be secured by the principal residence or the second home for which the deduction is claimed.

4.Only debt used to acquire, construct or substantially improve a residence qualifies for a deduction. (This debt is referred to as acquisition indebtedness.)

5.MID on refinancings is allowed only to the extent that the amount of debt on the refinancing does not exceed the amount of outstanding debt that is refinanced.

If you have any questions, we urge you to contact your tax preparer.