Tax Cuts and Jobs Act Current Effects
Under the Act, starting in 2018, the limit on qualifying acquisition debt is reduced to $750,000 ($375,000 for a married taxpayer filing separately). However, for acquisition debt incurred before Dec. 15, 2017, the higher pre-Act limit applies. This means you can refinance up to $1 million of pre-Dec 15, 2017 acquisition debt in the future. Also will not be subject to the reduced limitation. In 2018 there is no longer a deduction for interest on home equity debt.
This applies regardless of when the home equity debt was incurred. Accordingly, if you are considering incurring home equity debt in the future, you should take this factor into consideration. If you have outstanding home equity debt, be prepared to lose the interest deduction for it, starting in 2018.
Tax Cuts and Jobs Act Future Effects
These changes last for eight years, through 2025. In 2026, the pre-Act rules are scheduled to come back into effect. So beginning in 2026, interest on home equity loans will be deductible again. The limit on qualifying acquisition debt will be raised back to $1 million ($500,000 for married separate filers).
If you would like to discuss how these changes affect your particular situation. Also any planning moves you should consider for the 2017 tax filing year, in light of them, please contact us today!