Tutorial
Added on: December
26th , 2006
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
Full Article)
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