The new Tax Cuts and Jobs Act (TCJA) muddies the tax waters for mortgage interest, but if your clients qualify, they can now write off interest incurred for a boat or other vessel they use primarily for recreation this summer.
Briefly stated, deductions are reduced or even eliminated for certain mortgage interest expenses, beginning in 2018 and lasting though 2025. But they still may be able to navigate around the latest tax obstacles.
Let’s start with this basic premise: You can now deduct mortgage interest for a principal residence and one other home -- such as a vacation home by the shore or a lake – if the payments constitute “qualified residence interest.” Prior to the new law, deductions were available, within certain limits, for interest that qualified as either “acquisition debt” or “home equity debt.”
1. Home Equity Debt
When it is allowed under state law, you could also deduct the interest on home equity loans, regardless of how the proceeds were used. For instance, you might arrange a home equity line of credit for personal purposes like a buying a new car or taking a vacation.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.