The mortgage interest deduction is a current tax benefit to homeowners. It allows homeowners to deduct the interest paid on their home loans from their income taxes. This is one of the ways that the tax code currently incentivizes home ownership. While this is not the only tax break afforded to homeowners, it is definitely a part of what makes home ownership appealing and affordable. Will the mortgage interest deduction change in 2017? Here is a brief outline of the current law, and what we know about the future. Please consult a tax adviser for further information regarding the deductibility of interest and charges and to confirm any updates to the current tax code.
- If your mortgage is less than a million dollars, then you will be able to deduct all of your interest. ($500,000 limit if filing separately while married). Since the average home price is around $200,000, this means that the overwhelming majority of homeowners will not be anywhere near the deductible limit.
- This debt is called “Home Acquisition Debt”, and it can refer to any of the debt accrued in purchasing your house. It can also be applied to money spent fixing your house, or to a refinance. However, when refinancing or accruing debt in renovating a house, you may need to be careful to ensure that the interest deduction will apply immediately.
- The mortgage interest deduction has been around for a long time. This policy has been a key part of our tax code for a long time, and most citizens are in favor of retaining it. While changing it or removing it is sometimes discussed by politicians, it is overwhelmingly popular among citizens, and so has remained.
- Donald Trump has made statements suggesting that he is examining the mortgage interest deduction, and that it may not exist in its current form if he can implement his plans for the tax code.
- One of the proposals floated during his campaign was to cap itemized deductions at $100,000 and $200,000 respectively for single and joint filers.
So, despite some worry that Trump’s proposed tax code will hit one of the most popular deductions, there is no evidence yet to suggest it would effect the majority of home owners. It will be interesting to see what happens in 2017.