Beginning in 2018, the limits on qualified residence loans were lowered. This year, couples filing jointly may only deduct interest on up to $750,000 of qualified home loans, down from $1 million in 2017. For married taxpayers filing separate returns, the cap is $375,000; it was previously $500,000. These limits include any combination of qualified loans, such as mortgages, home equity loans and HELOCs. For example, if you have a first mortgage that is $300,000 and a home equity loan that’s $200,000, all the interest paid on both of those loans may be deductible since you didn’t exceed the $750,000 cap. If you took out a mortgage and or home equity loan/HELOC on or before December 15, 2017, you can still deduct the interest on up to $1 million in loans.
Remember to keep records of your spending on home improvement projects in case you get audited.
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