The question nobody ever asks: is all the mortgage interest my bank form 1098s shows deductible?
You are allowed to deduct mortgage interest if:
1. You took out your mortgages on first and second homes before October 13, 1987 – these mortgages are grandfathered into the rules and you can deduct all your interest.
2. You took out your mortgages on first and second homes after October 13, 1987 and you have $1,000,000 or less in regular mortgage and $100,000 or less in home equity debt (where you borrowed money and did not put the money into the house and did not refinance) you can deduct all your interest on these mortgage loans. You have to have the mortgages secured by the properties plus make all the payments in 1. and 2. to get the deduction.
3. If you refinance these mortgages, the additional money you take out may not be ‘acquisition indebtedness’, which means it could be considered personal loans and the interest on that part of the mortgage not deductible. If you don’t have home equity debt $100,000 of the additional mortgage refinanced can still be deducted, but the rest can’t. You will have to allocate the interest between deductible and non-deductible.
4. There may also be issues if you rented out your home for part of the year; the interest may have to be classified as rental interest as opposed to residential mortgage interest (which may not be a bad thing for taxes!)
Please call or email with questions and we can possibly meet and see what deductions you are entitled to.
You can count on us to count for you!