Mortgage-interest deduction
The new law allows taxpayers with existing mortgages to continue to deduct interest on a total of $1 million of debt for a first and second home.
For new buyers, the $1 million limit is now $750,000 for a first and second home.
This means that if Jane already has a $750,000 mortgage on a first home and a mortgage of $200,000 on a second one, she can continue to deduct the interest on both.
What if she already has one home with a $750,000 mortgage and wants to buy a second one next year and get a mortgage of $200,000? In this case, she couldn’t deduct the interest on the second loan, according to a spokesman for the National Association of Realtors, or NAR.
As to refinancings: The NAR says it believes homeowners can refinance mortgage debt existing on Dec. 14, 2017, up to $1 million and deduct the interest. But the new loan can’t exceed the amount of the mortgage being refinanced.
So if Ted has a $1 million mortgage he has paid down to $800,000, then he can refinance up to $800,000 of the debt and continue to deduct interest on it.
The law also suspends deductions for interest on home-equity loans through 2025.