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Vol 48; NEW TAX REFORM: TAX CUTS AND JOBS ACT / IRS CLARIFICATION ON HOME EQUITY LOANS INTEREST DEDUCTIONS

Posted by Admin Posted on Sept 12 2018

 

NEW TAX REFORM: TAX CUTS AND JOBS ACT


On December 22, President Trump signed into law the Tax Cuts and Jobs Act, a sweeping tax reform law that will entirely change the tax landscape. We hope you enjoyed our special newsletter releases updating you on some of the biggest new changes. If you missed any of the articles they are linked here for your quick reference:

Individual Tax Changes

Depreciation and Expensing Changes

20% Qualified Business Income Deduction

Corporation and Additional Individual Tax Changes
                      
Employee Parking

Estate and Gift Tax Exemptions

If you have questions about how any of these changes will effect your tax situation please feel free to reach out to us.

 
IRS CLARIFICATION ON HOME EQUITY LOAN INTEREST DEDUCTIONS

Written by: Becker and Rosen Staff

The IRS has announced that in many cases, taxpayers can continue to deduct interest paid on home equity loans under the recently enacted Tax Cuts and Jobs Act.

Taxpayers may deduct interest on mortgage debt that is “acquisition debt.” Acquisition debt means: debt that is secured by the taxpayer's principal home and/or a second home, and incurred in acquiring, constructing, or substantially improving the home. This rule hasn't been changed by the Tax Cuts and Jobs Act.

For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the limit on acquisition debt will be reduced to $750,000 ($375,000 for a married taxpayer filing separately). The $1 million, pre-Tax Cuts and Jobs Act limit applies to acquisition debt incurred before Dec. 15, 2017, and to acquisition debt arising from refinancing pre-Dec. 15, 2017, to the extent the debt resulting from the refinancing does not exceed the original debt amount.

Under the Tax Cuts and Jobs Act, for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, there is no longer a deduction for interest on “home equity debt.” The elimination of the deduction for interest on home equity debt applies regardless of when the home equity debt was incurred.

IRS said that despite the newly-enacted restrictions on home mortgages under the Tax Cuts and Jobs Act, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC), or second mortgage, regardless of how the loan is labelled.

IRS clarified that the Tax Cuts and Jobs Act suspends the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer's home that secures the loan.

For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses—such as credit card debts—is not. As under pre-Tax Cuts and Jobs Act law, for the interest to be deductible, the loan must be secured by the taxpayer's main home or second home, not exceed the cost of the home and meet other requirements.

For anyone considering taking out a mortgage, the Tax Cuts and Jobs Act imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. The lower limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer's main home and second home.

 
IMPORTANT TAX DATES TO REMEMBER


We want to remind you of important tax due dates and deadlines that are just around the corner. In addition to these dates please keep in mind that information provided to our firm for 1040 preparation on or after March 23th 2018 will receive an extension.

Here is a recap of important dates to keep in mind as 2018 progresses:

  • March 15, 2018 - Form 1065 and 1120-S
  • March 23, 2018 - Deadline to have individual tax prep info to Becker and Rosen
  • April 17, 2018 - Form 1040, 1041, and 1120, unless extended
  • April 17, 2018 - 2018 1st quarter estimate payment
  • June 15, 2018 - 2018 2nd quarter estimate payment
  • September 17, 2018 - 2018 3rd quarter estimate payment
  • September 17, 2018 - Form 1120-S and 1065, if extended
  • October 1, 2018 - Form 1041, if extended
  • October 15, 2018 - Form 1040 and 1120, if extended
  • January 15, 2019 - 2018 4th quarter estimate payment
     
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Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

Links to Third Party Websites
For your convenience, this newsletter may contain hyperlinks to websites and servers maintained by third parties. We do not control, evaluate, endorse or guarantee content found in those sites. We do not assume any responsibility or liability for the actions, products, services and content of these sites or the parties that operate them. Your use of such sites is entirely at your own risk.

 

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