Paul Miller and Judy talk through the 2018 tax changes that relate to the mortgage interest deduction. According to Paul, the majority of homeowners should end up paying about the same in taxes and some will even end up paying less in taxes. This is great news but the big thing to think about is how these changes will impact you if you’re looking to purchase a second home or a rental property. Here’s what you need to be careful about:
Purchasing a second home
cash from a home equity line of credit because you will not be able to add that second home as a deduction
Do – purchase a second home with a separate mortgage because when combined you can write off mortgage interest up to $750,000
Taking out a home equity line of credit
Don’t – use that money to purchase a boat, car, pay for your kid’s college, etc. because that interest will not be a deduction
Do – use that money to improve the home because that will qualify as a mortgage interest deduction on your 2018 taxes up to $750,000
Purchasing a rental property
Purchasing a rental property is a little different in the fact that you could take an equity position on your home to invest in a rental property, but that interest would be a deduction on the rental schedule and not apply to the principal mortgage interest deduction.
If you have questions, we encourage you to speak with your accounting professional. You’re also welcome to give Judy a call and she can connect you with Paul if you need help answering any additional questions.
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