Tax Deductions for Mortgage Int and Property Tax

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Hang on the Tax Law is a changing.  It is only applicable according to my CPA to the Schedule A (Personal Property) not Schedule E (investment property). That's a relief for those who own rental property. Yay and Yay.

The 2018 tax year has a $10,000 limit on deductions for Property and Income taxes collectively.  This single combined limit means that you could lose part of your property tax deduction even if it's less than $10k because your income tax deduction is now combined and could exceed the cap.  This is for the tax year 2018 filed in 2019.

Now with that out of the way, we turn to Mortgage Interest. New rules regarding that as well.  The Mortgage Interest deduction cap for 2018 is dependent on the year you bought the property.  If you acquire a home in 2018 - 2026 you are capped on interest of up to $750,000 in mortgage debt, used to purchase or improve your home.  If however you bought the home before 2018 the limit of $750k does not apply and interest is still deductible on up to $1MM in mortgage debt.

If you own a vacation home for example the two homes mortgage interest debt combined cannot exceed $1MM if purchased prior to 2018 or $750k for 2018 - 2026. Be sure to keep this cap in mind if you are thinking of purchasing a second home.

The last change is that in 2018 all interest on home equity debt is no longer allowed. Whew, are you ready to file your tax return now?  Be sure to check with your CPA for how the new tax law impacts your personal situation and to verify the impact for you personally.