If you have a mortgage or home equity loan, it is important to know that tax reform changes have an impact on the mortgage interest deduction.
The first change is that you can deduct interest only if you are using the funds to buy, build, or substantially improve your main home or a second home. This means that interest paid on some home equity loans is not deductible. For example, if you use the loan to buy a car, pay down credit card interest, or some other purpose, you cannot deduct interest paid in 2018.
The second change applies to loans that were originated after December 15, 2017. You can now only deduct interest on the first $750,000 of these loans, or $375,000 if you are married filing separately. If you refinanced a loan after December 15, 2017, there are some special rules that may allow you to deduct interest on the full amount that you refinanced. Check out IRS.gov for more information.
Don’t forget, to claim the mortgage interest deduction you must itemize on your tax return. Tax reform has boosted the standard deduction, so in the majority of cases, it will be a better deal to take the standard deduction instead of itemizing. However, there are still some cases where itemizing will pay off. Make sure you check with your tax adviser or accountant with any questions regarding your situation.