After an extended period of legislative near-stasis, the alterations wrought by the income tax Cuts and tasks operate of 2017 have caused an even of clients interest and involvement maybe not viewed for a long time. This current year it seems that everybody else, very obviously, have questions about how new rules will hurt their own tax costs and extremely usual concerns we’ve observed at Brighton Jones is it:

What’s taking place with all the mortgage interest deduction and that can I however subtract interest on a second mortgage?

Considering that the taxation rule is largely compiled by individuals with legislation grade, the clear answer is actually a resounding “it is dependent.”

You can find three major inquiries that will determine whether the attention paid on further mortgage loans (whether house assets next mortgages or mortgage loans on an extra room) is actually deductible, and we’ll walk-through these below.

1. What is the funds from the mortgage used in?

Beginning in tax 12 months 2018 (returns due April 15, 2019), only interest compensated on “acquisition indebtedness” are subtracted. Which means that interest is just deductible in the event that loan was applied possibly to acquire, create, or “substantially improve” a main or 2nd homes.Continue reading→