How Possible is it to Claim the Deduct Mortgage Interest?
One popular deduction which is still very much available to taxpayers is the mortgage interest tax deduction. The post sheds light into this once popular mortgage tax deduction, what has changed about it, and if it is still worth claiming.
Starting from 2018, the TCJA has reduced the principal limit in which interest can be deducted from $1,000,000 to $750,000. For married taxpayers who are filing a separate return, the limit has been scaled down from $500,000 to $375,000. These new changes are to last till the 2025 tax year but the limits do not apply to loans from 2017 or before.
The tax blog did put to rest the belief by most Americans that they will not be able to deduct any home equity loan interest with the new tax reforms. As long as the loan is used to improve the home and not used for other personal expenses, taxpayers will be able to deduct the interest. The mortgage deductions will only apply to a taxpayer's primary residence or second home and will not apply to an investment property. Furthermore, the loan value and the interest deducted can’t be worth more than the initial cost of the home.
Mortgage interest deduction still remains an itemized deduction. So in order to claim it, taxpayers will need to make sure that their standard deduction isn’t worth more than their itemized deductions. But with the TCJA doubling the standard deduction, it is no longer a tough choice to make. This leaves only 30% of American taxpayers itemizing their deductions. And this is expected to drop even further to 5% in the coming years.
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