- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Deductions & credits
Thank you @KrisD15 for this information. I was aware of this option but didn't give much attention because of its locked-in feature and the interest for the condo is not deductible deducted elsewhere (business, rental etc.). Let's look into applying this option:
Tax Year 2023:
Deducting Main Only: All interest is deductible = $12,465
Deducting Both Loans: $750K/1.183M = 63.4% of ($12,048 + $12,465) = $15,541
Result: A loss of $3,076 in deductions
Tax Years 2024 & 2025:
Deducting Main Only: All interest is deductible = $49,860
Deducting Both Loans: $750K/1.183M = 63.4% of ($12,048 + $49,860) = $39,250
Result: A gain of $10,610/yr for two years
Tax Years 2026 and beyond (post TCJA):
Deducting Main Only: All interest is deductible = $49,860
Deducting Both Loans: $1M/1.183M = 84.5% of ($12,048 + $49,860) = $52,312
Result: A loss of $2,452/yr for all remaining years
If you are considering this option, it would benefit you to wait until next year to start to avoid the loss of deductions this year. Remember, if you don't apply this option, your percentage of deductible interest will increase slightly each year as the mortgage balances decrease.