Mortgage Interest Deduction in 2018

The mortgage interest deduction is a tax deduction that allows homeowners to reduce their taxable income by the amount of mortgage interest they paid during the year. The deduction is available for both primary residences and second homes.

Key Facts

  1. The maximum amount of debt eligible for mortgage interest deduction in 2018 is $750,000 for individuals ($375,000 if married filing separately).
  2. Higher limitations of $1 million ($500,000 if married filing separately) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.
  3. Mortgages that existed as of December 15, 2017, will continue to receive the same tax treatment as under the old rules.
  4. Deductible mortgage interest is interest paid on a loan secured by a main home or second home that was used to buy, build, or substantially improve the home.
  5. For tax years prior to 2018, the maximum amount of debt eligible for the deduction was $1 million, and the interest paid on up to $100,000 of home equity debt was also deductible.
  6. Beginning in 2018, the maximum amount of debt is limited to $750,000, and the interest on home equity debt is no longer deductible unless it was used to buy, build, or substantially improve the home.
  7. The deduction is generally limited if all mortgages used to buy, construct, or improve your first home and second home (if applicable) total more than $1 million ($500,000 if married filing separately) for tax years prior to 2018. Beginning in 2018, this limit is lowered to $750,000.

Eligibility

To be eligible for the mortgage interest deduction, the following requirements must be met:

  • The loan must be secured by a qualified home.
  • The home must be the taxpayer’s primary residence or a second home.
  • The loan must be used to purchase, build, or substantially improve the home.

Amount of Deduction

The maximum amount of debt eligible for the mortgage interest deduction in 2018 is $750,000 for individuals ($375,000 if married filing separately). This limit is lower than the $1 million limit that was in place for tax years prior to 2018.

Higher limitations apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.

  • $1 million ($500,000 if married filing separately) for a loan secured by your main home
  • $100,000 for a loan secured by a second home

Limitations

The mortgage interest deduction is subject to certain limitations. For example, the deduction is generally limited if all mortgages used to buy, construct, or improve your first home and second home (if applicable) total more than $1 million ($500,000 if married filing separately) for tax years prior to 2018. Beginning in 2018, this limit is lowered to $750,000.

How to Claim the Deduction

To claim the mortgage interest deduction, you must itemize your deductions on Schedule A of your tax return. You will need to provide the following information:

  • The name of the lender
  • The loan account number
  • The amount of mortgage interest paid during the year

Sources

FAQs

 

What is the maximum amount of mortgage debt that is eligible for the deduction in 2018?

The maximum amount of mortgage debt that is eligible for the deduction in 2018 is $750,000 for individuals ($375,000 if married filing separately).

 

Is the mortgage interest deduction available for both primary residences and second homes?

Yes, the mortgage interest deduction is available for both primary residences and second homes.

 

What types of loans qualify for the mortgage interest deduction?

Loans that qualify for the mortgage interest deduction include loans that are secured by a qualified home and that are used to purchase, build, or substantially improve the home.

 

Are there any limitations on the mortgage interest deduction?

Yes, there are certain limitations on the mortgage interest deduction. For example, the deduction is generally limited if all mortgages used to buy, construct, or improve your first home and second home (if applicable) total more than $1 million ($500,000 if married filing separately) for tax years prior to 2018. Beginning in 2018, this limit is lowered to $750,000.

 

How do I claim the mortgage interest deduction?

To claim the mortgage interest deduction, you must itemize your deductions on Schedule A of your tax return. You will need to provide the following information:

  • The name of the lender
  • The loan account number
  • The amount of mortgage interest paid during the year

 

What is the difference between the mortgage interest deduction and the home equity loan interest deduction?

The mortgage interest deduction is available for interest paid on loans that are secured by a qualified home and that are used to purchase, build, or substantially improve the home. The home equity loan interest deduction is available for interest paid on loans that are secured by a qualified home and that are used for any purpose.

 

Is the mortgage interest deduction still available for loans that were originated before December 16, 2017?

Yes, the mortgage interest deduction is still available for loans that were originated before December 16, 2017. However, the deduction is subject to the new limits that were enacted by the Tax Cuts and Jobs Act of 2017.

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