Deductible mortgage interest is any interest you pay on a loan secured by a main home or second home that was used to buy, build, or substantially improve your home. For tax years prior to 2018, the maximum amount of debt eligible for the deduction was $1 million.
Are there any changes to the mortgage interest deduction?
Owning your own home comes with some nice tax perks. One of them is the home mortgage interest deduction. The Tax Cuts and Jobs Act (TCJA) affected this deduction somewhat when it went into effect in 2018, but the legislation did not eliminate the deduction from the tax code entirely. 1 It just sets some limits and restrictions.
When to claim mortgage interest on your taxes?
For example, if you got an $800,000 mortgage to buy a house in 2017, and you paid $25,000 in interest on that loan during 2020, you probably can deduct all $25,000 of that mortgage interest on your tax return. However, if you got an $800,000 mortgage in 2020, that deduction might be a little smaller.
Can you deduct grandfathered mortgage interest on your taxes?
Grandfathered debt isn’t limited. All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home’s fair market value for home equity debt.
What was the mortgage interest deduction before the tax cuts and Jobs Act?
Before the Tax Cuts and Jobs Act, the mortgage interest deduction limit was $1 million. Today, the limit is $750,000. That means this tax year, single filers and married couples filing jointly can deduct the interest on up to $750,000 for a mortgage, while married taxpayers filing separately can deduct up to $375,000 each.
