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47-46 Vernon Blvd., 2nd Fl. LIC, NY 11101
718.707.0955 (F) 718.707.0959
41-18 Crescent St. LIC, NY 11101
718.707.0295 (F) 718.707.0299
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Hernan Barona, E.A
41-18 Crescent St., Long Island City, NY 11101
T: 718-707-0295 • F: 718-707-0299
47-46 Vernon Blvd Second Floor
Long Island City, NY 11101
T: 718-707-0955 • F: 718-707-0959
*Standard fees for tax preparation and other products and services apply.
OBTP# B13696 ©2019 HRB Tax Group, Inc.
BY JOHN SAVIGNANO, CPA
Thinking of buying a home or refinancing before mortgage interest
rates shoot up even higher? You can still deduct mortgage interest
on Schedule A of your 1040 if you itemize deductions.
But the new tax law cut back the break in some cases, depending on
the size of the loan, date of the loan and how you use the loan
proceeds. We’ll turn now to some of the changes.
Interest can be deducted on up to $750,000 of total home acquisition
debt…indebtedness that is secured by your primary home or a
single secondary home and that is incurred to buy, construct or
substantially improve the residence. Before tax reform, interest
could be deducted on up to $1 million of mortgage debt.
The $750,000 limit generally applies to debt incurred after December
15, 2017. Older home mortgage loans are grandfathered in and
get the $1 million cap. Ditto for refinancing of pre- December 16,
2017 debt…up to the old loan amount. The $1 million debt limit also
applies to home buyers who had a binding contract to purchase a
house before December 15, 2017, and who closed on it by March 31,
The treatment of interest on home equity and refinance payout
loans is tricky. Before 2018, you could use cash from these loans to
pay off credit card debt, buy a car or take a trip, and deduct interest
on up to $100,000 of the debt. Those days are gone for both existing
and new home-related debt, thanks to tax reform. This crackdown
doesn’t apply to home equity loans or payouts secured by a first or
second residence and used to buy, build or substantially improve a
home. Debt used for these purposes has always been considered
acquisition indebtedness. Improvements are substantial if they add
value to the home, extend the residence’s useful life or create new
uses for the home. Additions and renovations count…basic repairs
and maintenance don’t.
One thing that hasn’t changed: The rules for deducting points.
Points paid on loans to buy, build or improve your primary home
are still generally deductible in the year you pay them. If you’re
refinancing, you’ll have to deduct points ratably over the life of the
loan. If you sell your home, you can deduct any remaining points in
the year of sale. You get a break if you refinance again. The later
refinancing triggers the write-off of the balance of the points from
your first refinancing, usually. But, if you refinance with the same
lender, you add points on the latest refinancing to leftover points
from the first deal and take the amount over the term of the new
The fate of the deduction for mortgage insurance premiums is up
in the air. The write-off was first set to die off over a decade ago, but
Congress kept reviving it. Most recently, it was retroactively resurrected
in February 2018, but only for 2017 returns. There’s bipartisan
support to extend this break for 2018. But time is running out for
passage this year, especially with the government shutdown.
John Savignano is a partner with Savignano Accountants & Advisors
located at 47-46 Vernon Blvd., Second Floor, in Long Island City.
If you have any questions or require additional information, please
call John at 718-707-0955.