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Hey guys, there seems to be a lot of debate around this, and I've heard conflicting reports on how tax reform will affect the mortgage interest deduction in NYC from the media, accountants and lawyers.
From my understanding and what a very seasoned real estate lawyer told me, the limit for acquisition indebtedness is lowered from $1 million to $750,000. However, existing mortgages are grandfathered under the old limit. Moreover, if your deal is in contract by 12/15/2017 and is slated to close by 3/31/2018 then you will also be grandfathered under the old rules.
You also keep hearing in the media that home equity lines are dead and that you cannot deduct interest at all from HELOCs going forward under the new tax law. However, if you actually read the new tax code it doesn't seem that simple, there's more to this than just "HELOCs are finished."
The new tax code says loans taken out to fund a "substantial improvement" of the property counts as acquisition indebtedness. So to our understand you definitely can take a HELOC out if the use of proceeds is to renovate your home. The lawyer did say that the IRS has yet to come out with a ruling on this, and has been silent on this issue so far.
Also, it seems that mortgage debt on qualified second homes are still includible in the $750,000 limit. However, the $750,000 limit is for debt on both homes. Does anyone have anything to add to this?
From my understanding and what a very seasoned real estate lawyer told me, the limit for acquisition indebtedness is lowered from $1 million to $750,000. However, existing mortgages are grandfathered under the old limit. Moreover, if your deal is in contract by 12/15/2017 and is slated to close by 3/31/2018 then you will also be grandfathered under the old rules.
You also keep hearing in the media that home equity lines are dead and that you cannot deduct interest at all from HELOCs going forward under the new tax law. However, if you actually read the new tax code it doesn't seem that simple, there's more to this than just "HELOCs are finished."
The new tax code says loans taken out to fund a "substantial improvement" of the property counts as acquisition indebtedness. So to our understand you definitely can take a HELOC out if the use of proceeds is to renovate your home. The lawyer did say that the IRS has yet to come out with a ruling on this, and has been silent on this issue so far.
Also, it seems that mortgage debt on qualified second homes are still includible in the $750,000 limit. However, the $750,000 limit is for debt on both homes. Does anyone have anything to add to this?