2018- Itemized deductions-Residence interest
Answer:
Pursuant to the Act, for tax years beginning after December 31, 2017 and before January 1, 2026, a deduction will only be allowed for interest on a debt that qualifies as Acquisition Indebtedness. No deduction will be allowed for Home Equity debt.
In addition, the Act reduces the amount of eligible Acquisition Indebtedness borrowing to $750,000 for any debt incurred on or after December 15, 2017.
A taxpayer who entered into a binding contract before December 15, 2017 to close on the purchase of a residence before January 1, 2018, and who actually closes on the acquisition before April 1, 2018, shall be considered to have incurred the Acquisition Indebtedness before December 15, 2017.
ii. The old Acquisition Indebtedness limits continue to apply to taxpayers who refinance existing Acquisition Indebtedness as long as the indebtedness resulting from the refinancing does not exceed the amount of the original debt.
For 2017, the deduction for Qualified Residence Interest was limited to interest paid on up to $1,000,000 of borrowing that qualified as “Acquisition Indebtedness” and up to $100,000 of borrowing that qualifies as “Home Equity Indebtedness”.
Acquisition Indebtedness being defined as debt incurred to acquire, construct or substantially improve a principal residence or a second home, with no restriction on the use of Home Equity Indebtedness.
In addition, the Act reduces the amount of eligible Acquisition Indebtedness borrowing to $750,000 for any debt incurred on or after December 15, 2017.
A taxpayer who entered into a binding contract before December 15, 2017 to close on the purchase of a residence before January 1, 2018, and who actually closes on the acquisition before April 1, 2018, shall be considered to have incurred the Acquisition Indebtedness before December 15, 2017.
ii. The old Acquisition Indebtedness limits continue to apply to taxpayers who refinance existing Acquisition Indebtedness as long as the indebtedness resulting from the refinancing does not exceed the amount of the original debt.
For 2017, the deduction for Qualified Residence Interest was limited to interest paid on up to $1,000,000 of borrowing that qualified as “Acquisition Indebtedness” and up to $100,000 of borrowing that qualifies as “Home Equity Indebtedness”.
Acquisition Indebtedness being defined as debt incurred to acquire, construct or substantially improve a principal residence or a second home, with no restriction on the use of Home Equity Indebtedness.
