Can You Deduct Mortgage Interest on Your 2018 Taxes?

Yes, you could deduct mortgage interest on your 2018 taxes, but there were specific limitations based on the Tax Cuts and Jobs Act (TCJA) that took effect in 2018. Understanding the nuances of deducting mortgage interest is crucial for maximizing your tax benefits. This article will explore the key points regarding mortgage interest deductions for that tax year.

Primary Residence and Second Homes

You could deduct interest on mortgage loans for your primary residence and a second home. This provision ensures that homeowners can benefit from the mortgage interest deduction, regardless of the number of homes they own.

Loan Limits

The loan limits for deducting mortgage interest imposed by the TCJA are as follows:

For mortgages taken out after December 15, 2017: You could deduct interest on up to $750,000 of mortgage debt. If filing separately, the limit is $375,000. Mortgages taken out before that date: Were still subject to the old limit of $1 million or $500,000 if married filing separately.

Home Equity Loans

The deductibility of interest on home equity loans or lines of credit is more restrictive. It is only deductible if the funds were specifically used to buy, build, or substantially improve the home that secures the loan. This limitation aims to discourage using home equity lines of credit for consumption purposes.

Itemized Deductions

To claim the mortgage interest deduction, you had to itemize your deductions on Schedule A of your tax return. If you prefer to take the standard deduction, you would not benefit from the mortgage interest deduction, as it replaces itemized deductions.

Is It Worth Itemizing Your Deductions?

Most people do not have enough itemized deductions to outweigh the standard deduction, which can be significantly higher. For 2017’s tax year, the standard deduction jumped to $12,000 per person. Therefore, it is likely that you will not have more itemized deductions than the standard, making it more advantageous to take the standard deduction instead of itemizing.

When to See a Tax Professional

If you are unsure about the specifics of your deductions or need personalized advice, it is always a good idea to consult with a tax professional or refer to IRS guidelines. Tax laws can be complex, and professional guidance can help ensure you are taking full advantage of all available deductions.

Remember, the key to maximizing your tax benefits lies in understanding the specific provisions of the tax laws and how they apply to your unique financial situation. Consult a tax expert to tailor advice to your needs.