With proposed changes for re-finances on a house under $750,000 and a cash-out option, will I be able to deduct mortgage interest on my 2018 return for the entire loan?

[DianeW]

Yes.  The mortgage interest deduction for 2018, as we know it pending actual instructional guidance, is as follows:

• Home mortgage interest is deductible for outstanding mortgage balances of up to $750,000.  So if your outstanding mortgage balance is $750,000 or less, all the interest is deductible. If more than that amount, then only the interest paid on the first $750,000 is deductible.

[macluker]

What if I have a cash-out option on the mortgage?   Will that be tax deductible?   I was reading an article in WSJ that said if any portion is used for cash out, the then whole load will not be deductible.  Is that true or being considered for 2018?

[DianeW]

@macluker Even a “traditional” 30-year mortgage may not be fully deductible interest if it is a cash-out refinance and the cashed out portion was used for other purposes. I say "may not" because final legislation has not yet been written down for tax law by the IRS, for next year.  Acquisition debt will be deductible (money used to buy, build or improve the main home including adding a garage or other structure on the property) up to the limit. It's possible each taxpayer may be responsible for tracking any cash used for other purposes since the Form 1098 will likely include the full amount of the mortgage interest.

[macluker]

Thanks for the response.  very  much appreciated.

[DianeW]

@macluker You're welcome!