July 14, 2010
It bears repeating

Don't run afoul of rules for mortgage interest deductions

With mortgage interest rates at generational lows, you may be inclined to purchase a new home, take out a loan to make improvements on your existing home or take out a second mortgage to pay down high-interest credit card debt.

The IRS has issued a reminder that interest deductions on home mortgages are limited, including limitations for home acquisition and home equity indebtedness.

There is one limit for loans used to buy, build or substantially improve a residence – called home acquisition debt. There is another limit for loans secured by a qualified residence but used for other purposes – called home equity debt.

The tax law allows a deduction for interest on indebtedness secured by your residence. Acquisition indebtedness cannot exceed $1 million. Home equity indebtedness cannot exceed $100,000.

Read more in IRS Headliner Volume 299.

Contact our firm if you have any questions or comments about this article.

The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.

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