Another big change for taxpayers is that Congress has set a new, lower dollar limit on home mortgage interest, and many taxpayers are not aware of this.   Effective Dec. 16, 2017, taxpayers obtaining new mortgages may deduct their mortgage interest applicable up to $750,000 in home loans.  The $750,000 home loan limit applies to the combined total of loans used to buy, build or improve a taxpayer’s main home and second home.   For example, in 2019, if a taxpayer took out a $500,000 mortgage to buy a home, and later the taxpayer took out another $250,000 home equity loan to build an addition on the home,  because the total amount of both loans does not exceed $750,000, the I.R.S. has said that all of the interest paid on the loans is deductible.

However, if the taxpayer uses any portion of the loan for “personal” use, such as to pay off credit card debt, auto debt or student loan debt, that portion would not be deductible, since that portion of the interest expense was not related to the purchase of a home or home improvement.  If you have any questions, please give our office a call.