With the start of a brand new year, many people will look ahead and map out goals and aspirations for what they would like to accomplish – and for some, this could mean purchasing a new home. If this includes you, there are some things that you need to know before moving forward, though – especially if you will need to take out a mortgage when you make the purchase. For example, one key consideration is the amount of mortgage interest that you may be able to deduct on a home mortgage. In the past, the mortgage interest deduction has been a major benefit to homeowners. This, however, is changing, based on the new tax laws that were passed in December of 2017.
Based on this ruling, tax payers who have existing home mortgages (i.e., mortgages that were secured on or before December 15, 2017) will still be allowed to deduct interest on a total of $1 million of mortgage debt. This is the case for a first and second home.
For new home purchasers, though, this $1 million amount has dropped down to $750,000 of mortgage debt. The recently passed ruling has also suspended the deduction for interest on home equity loans and lines of credit through the year 2025.
The good news is that this ruling will not have an effect on your 2017 tax return, so home owners won’t need to worry about a lesser amount of home mortgage interest deduction until filing their 2018 tax returns in early 2019.
If you’re ready to move forward with the purchase of a new home, then give us a call. We will work with you throughout the entire process, from determining the size, style, and location of your dream home to giving you the keys to your new front door.