Allowable Mortgage interest

pp — Fri, 25 Jan 2019 04:39:37 GMT

I am confused with the new tax law regarding allowable mortgage interest when refinancing a loan. In 2011, I purchased my home with a loan for $225,000 and cash of $60,000. Since that time, I have refinanced twice taking out cash to pay off debt. As, of the end of 2018, by mortgage loan balance is $223,000 (close to the original loan amount). Can I deduct the entire amount of interest I paid on the loan in 2018?

Re: Allowable Mortgage interest

MargaretL — Wed, 30 Jan 2019 14:49:11 GMT

The determining factor here is the purpose of the cashout... If it was used to pay off your personal debt, then you cannot deduct the entire interest paid on the loan. If it was used for the home, then you can.

But don't worry, TurboTax will calculate the amount for you. The program will ask you:

If this is an original loan or a refinance, and
have you ever pulled cash our from the loan when you refinanced it

Then it will ask if the money was used on the home... if you select no, you will be able to enter how much of the loan proceeds were used to purchase, build or improve the home secured by the loan. You would simply reduce the loan amount by the cashout amount (if you, in fact, did NOT use the cash for that purpose).

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Allowable Mortgage interest

Re: Allowable Mortgage interest