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What do you mean I can't write off all my home mortgage interest?

by admin 14. July 2010 09:33

Yes, it’s sad, but true. Section 163(h) of the Internal Revenue Code states that the interest deduction is limited to the interest paid on acquisition debt of up to $ 1,000,000. Interest paid in excess of the ceiling is treated as non-deductible personal interest expense.

With second loans, such as home equity loans or lines, the news is even worse! Only the first $ 100,000 of average principal on one of these arrangements will result in deductible interest. The good news is at least the proceeds may be used for personal purposes and is deductible regardless.

With both of these loan types, the excess is calculated as a pro-ration. For example, if your average first loan balance is $ 1.5 million, divide the ceiling ($1 million) into $ 1.5 million. Then multiply that percentage (67%) by the total mortgage interest and that is the deductible portion.

Thanks for reading!



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