703-829-5478

Elizabeth Ann Kline                           Real Estate Agent - Realtor - Springfield 22153 - Burke 22015 - West Springfield 22152 - VA - Fairfax County Virginia

Email Elizabeth Ann Kline

Springfield & Burke Virginia's #1 Premier Realtor® Team

Real Estate For Sale Burke Springfield VA
Next Arrow

Blogging about Springfield - Burke - Lorton - Woodbridge - Alexandria, VA and Beyond...

Renting Home Tax Free Girl with Glasses

How the new Tax laws affect acquisition debt and what to know!

Elizabeth Ann Kline Sell My Home Buy a Home Springfield Va Burke Lorton Woodbridge Alexandria
kevin kline

Acquisition Debt is the amount of money borrowed used to buy, build or improve a principal residence or second home. Under the new tax law, mortgages taken after 12/14/17 are limited to a combination of $750,000 on the first and second homes. The mortgage interest on this debt is tax deductible when itemizing deductions.

It is a dynamic number that is reduced with each payment as the unpaid balance goes down. The only way to increase acquisition debt is to borrow money to make capital improvements.

Prior to the new law, homeowners could additionally borrow up to $100,000 of home equity debt for any purpose and deduct the interest when itemizing deductions. Mortgage interest on home equity debt is no longer deductible unless it is for capital improvements.

Acquisition debt cannot be increased by refinancing. Some confusion occurs because mortgage lenders are concerned in making home loans that will be repaid according to the terms of the note and using the home as collateral. That does not include making a tax-deductible mortgage.

Another thing that adds confusion to the issue is that the lenders will annually report how much interest was paid in a year but only the amount that is attributable to acquisition debt is deductible.

Even if the interest on the cash-out refinance is not deductible, it may be advantageous to pay off higher interest debt such as credit card debt and replacing it with lower mortgage debt.

It is the responsibility of the taxpayer to know what part of their mortgage debt is deductible. The challenge becomes more difficult after a cash-out refinance. Homeowners should keep records of all financing and capital improvements and consult with their tax professional.

Acquisition Debt; A word homeowners need to understand!

Elizabeth Ann Kline Real Estate Agent Blog
twitter logo

_____________________
Kevin Kline is a licensed Realtor® with RE/MAX Executives in
Springfield, VA.  Kevin contributes articles, blogs and content to ListWithElizabeth.com as well as third party content that has been authorized to be used by and for Elizabeth Ann Kline and ListWithElizabeth.com

Articles, events and ideas from
"Your Favorite Realtor®"

Elizabeth Ann Kline

July 10, 2018

By: Kevin D. Kline

@klineonline