There are 2 types of debt that
fall under the Home Mortgage Interest Tax deduction provision
and are tax-deductible. The first type of debt is debt that was
acquired in order to build, purchase or improve your home. The
second type of debt is called equity debt because the collateral
used is drawn on the equity of your home. You can therefore take
out a maximum debt of $1.1 million and deduct the mortgage interest
from your taxes payable. However, any of the mortgages you acquire
must fall into 1 of the following categories:
- Debt Acquired Before October 13,
1987: Referred to as "Grandfathered debt",
you can deduct all interest paid on any of this debt.
- Debt Acquired After October 13,
1987: If you took out this debt to build, purchase
or improve your home, you can fully deduct all interest paid
on this debt provided the total debt you acquired (including
the Grandfathered Debt) does not exceed $1 million for married
couples or $500,000 for singles.
- Home Equity Debt Acquired After
October 13, 1987: If you acquired debt after this date
for reasons OTHER than to build, improve or purchase your home,
the maximum can be $100,000 for married couples or $50,000 for
singles. (View
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