How much mortgage interest can I deduct in 2018?
If you’re a homeowner who itemizes deductions on your tax return, you may be able to deduct the interest you pay on your mortgage. However, the amount of mortgage interest you can deduct depends on several factors, including the type of mortgage, the year it was taken out, and the amount of debt you have. In this article, we’ll explore the details of mortgage interest deductions for the tax year 2018.
Understanding the Mortgage Interest Deduction
The mortgage interest deduction allows homeowners to reduce their taxable income by the amount of interest they pay on a qualified mortgage. To qualify for this deduction, the mortgage must have been taken out to buy, build, or substantially improve your main home or a second home. The deduction is subject to certain limitations, which we’ll discuss below.
Limitations on Mortgage Interest Deductions
For the tax year 2018, the following limitations apply to mortgage interest deductions:
1. Debt Limit: The total amount of debt on which you can deduct interest is generally limited to $750,000 ($375,000 if married filing separately). This limit applies to mortgages taken out after December 15, 2017. For mortgages taken out before that date, the limit is $1 million.
2. Property Limit: You can only deduct interest on one primary home and one secondary home. If you own multiple properties, you must choose which ones to apply the deduction to.
3. Home Improvement Limit: Interest on home improvement loans that are secured by your primary or secondary home may also be deductible, but only if the improvements increase the home’s value or are considered permanent additions.
Calculating Your Deduction
To calculate your mortgage interest deduction for 2018, you’ll need to gather the following information:
1. Mortgage Statement: Your mortgage statement will show the total interest paid for the year.
2. Points Paid: If you paid points to get a better interest rate on your mortgage, you may be able to deduct these points over the life of the loan.
3. Home Equity Loan Interest: If you have a home equity loan, you can deduct the interest on up to $100,000 of such debt ($50,000 if married filing separately).
Once you have this information, simply add up the total interest paid and apply the appropriate limitations to determine the amount of mortgage interest you can deduct on your tax return.
Conclusion
Understanding how much mortgage interest you can deduct in 2018 is crucial for maximizing your tax savings as a homeowner. By following the guidelines outlined above and consulting with a tax professional if needed, you can ensure that you’re taking full advantage of this valuable deduction. Remember that tax laws are subject to change, so it’s always a good idea to stay informed about the latest regulations affecting homeowners.
