Contrary to popular belief, mortgage interest is NOT always tax deductible. Here's some basic information to help guide you to determining if your mortgage interest could be deducted:
1. DO YOU ITEMIZE YOUR TAX DEDUCTIONS?
First thing first, you cannot take the mortgage interest deduction if you are taking the standard deduction. In 2018, the standard deduction is $12,000 for single taxpayers, $18,000 for heads of household, and $24,000 for married taxpayers filing a joint return. In 2013, 30% of households itemized their deductions and experts are expecting the number of people that itemize to decrease with the increase in the standard deduction. Please see a CPA for details.
Mortgage interest is only deductible if the mortgage is attached to a "qualified residence". Taxpayers can generally deduct the mortgage interest on two qualified homes:
Your mortgage or home equity line of credit is considered "acquisition indebtedness" if it was used to buy, build or improve a qualified residence. Generally, you can deduct the interest on mortgage balances up to $750,000 of Acquisition Indebtedness. Here are two examples:
As you can see, it's very important to structure your mortgage in a way where it can be classified as "acquisition indebtedness"! Here are three common mistakes that many people make when choosing a mortgage strategy and deducting their mortgage interest:
Everything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.
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Capstar Lending, LLC NMLS 214411 (www.nmlsconsumeraccess.org) 6836 Austin Center Blvd #110; Austin TX 78731 512-459-2400. Capstar Lending, LLC is an Equal Housing Lender. This is not an offer to enter into an agreement. Information, rates and fees are subject to change without prior notice. Loan approval is subject to applicant's qualification for a loan program. All products are subject to credit and property approval. Capstar Lending, LLC is not affiliated with any government agency. Intended for Texas consumers only, Texas- SML Mortgage Banker Registration. Residential Mortgage Loan Originator.
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