“Mortgage Interest Deduction allows homeowners to reduce their taxable income by deducting the amount paid in mortgage interest. This is a remarkably effective tool that facilitates homeownership..”

What Are the Limits on Mortgage Tax Interest Deductions?

• The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/2017. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.

• Homeowners may refinance mortgage debts existing on 12/14/2017 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.

• The final bill repeals the deduction for interest paid on home equity debt through 12/31/2025. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.

• Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.

Quick Takeaways

• The value of the mortgage interest deduction depends on the value of your home and how you take deductions

• Helps homeowners reduce their taxes

• You must itemize your tax return