topic Re: Home Mortgage Interest Deduction in Deductions & credits

Home Mortgage Interest Deduction

camassa — Mon, 07 Apr 2025 15:27:15 GMT

I took out a mortgage in July 2016 to buy my primary home. In 2024 I added to the balance of of my home acquisition debt to make substantial improvements to my primary home. Is the additional debt subject to the $1M/$500K home acquisition debt limit since it is the same primary home purchased in 2016, or is it considered a new loan and subject to the $750K/$375K home acquisition debt limit for debt incurred after 12/15/2017?

In the step by step mode in TT, it asks "Is this loan a HELOC or a refinance of a previous loan?". One of the possible responses is "No, this loan is neither of these". What qualifies as "neither of these"?

Thanks

Re: Home Mortgage Interest Deduction

Vanessa A — Mon, 07 Apr 2025 16:34:57 GMT

Since you modified the loan in 2024, it would be subject to the $750/$375 limit.

Neither of these would mean it was the original loan that was not refinanced, did not take out extra money or was a home equity loan.

Re: Home Mortgage Interest Deduction

camassa — Mon, 07 Apr 2025 20:30:00 GMT

Thanks, Vanessa.

Re: Home Mortgage Interest Deduction

zomboo — Tue, 08 Apr 2025 02:13:00 GMT

What do you mean by 'In 2024 I added to the balance of of my home acquisition debt'. Did you do a cash-out refinance or did you take out a second mortgage? If you refinanced and took out cash, the limit on the new loan is $750K. If you took out a second mortgage, your existing mortgage limit is still $1.1M and the limit on the second mortgage is $750K. Note, however, that the $750K limit on the second mortgage is reduced by the limit amount used up on the existing mortgage.

Re: Home Mortgage Interest Deduction

camassa — Tue, 08 Apr 2025 21:54:37 GMT

I did not take out a second mortgage. I refinanced the original mortgage and borrowed additional funds to make substantial improvements to my home.

Re: Home Mortgage Interest Deduction

KrisD15 — Wed, 09 Apr 2025 00:10:21 GMT

Enter the 1098 and report that it was a refinanced loan.

Continue through the interview and indicate that there was cash taken, and that the cash was used on the home.

Re: Home Mortgage Interest Deduction

camassa64 — Wed, 09 Apr 2025 18:06:25 GMT

Thanks. I now have almost enough information to properly determine the allowed mortgage interest deduction.

In addition, I see that Box 2 of the 1098 shows the outstanding mortgage balance at the end of the tax year, according to my mortgage statements. I thought it was supposed to indicate the balance at the beginning of the tax year. Which is correct?

Re: Home Mortgage Interest Deduction

zomboo — Wed, 09 Apr 2025 21:03:56 GMT

Since you refinanced in 2024, you will have two 1098's, one for the original mortgage and one for the refinancing mortgage. Box 2 should should the balance as of Jan 1, 2024 for the original mortgage. For the refinancing mortgage, Box 2 should show the new beginning balance in Aug which includes the amount refinanced plus the cash out.

Re: Home Mortgage Interest Deduction

camassa64 — Thu, 10 Apr 2025 15:38:54 GMT

Accepted Solution.