Eric Sheldon CPA, PC

The $750K Mortgage Interest Limitation

How to use equity in your home and bypass the $750K Mortgage Interest Limitation

Here’s what’s happening:

Under Tax Cut and Jobs Act, for tax years beginning after December 31, 2017 and before January 1, 2026 a taxpayer may not deduct home mortgage interest expense greater than $750,000 mortgage on taxpayer’s principal residence.

Here’s what I think about it:

With real estate appreciating in value, hopefully you are benefitting with built in equity on your primary residence. There are at least a couple of scenarios that I see possible in borrowing against your primary residence in a cash-out refinance. Taking a loan against your home may provide opportunities to pursuing your interest.

Infographic: Eric Sheldon CPA PC explains the $750K Mortage Limitation

Here are some things you can do about it:

  1. use the money to start a business. This allows you to have funding for start-up cost, etc.
  2. buy bitcoins.
  3. purchase an investment property and need a down payment. Make sure you run scenarios to achieve positive cash flow before making the purchase.

Here’s Why:

If the debt is traceable to other expenditures, the interest is treated under the various rules for personal, trade or business, passive activity, or investment interest, depending on the use of the proceeds as determined by the tracing rules. The fact that debt is in excess of the ceiling on qualified residence debt is irrelevant and is deductible.

Disclaimer:
There are different rules applied to home acquisition debt and home equity loans. This blog focuses only on home acquisition debt.

Did you like this article?

Get notified when I publish new articles. Just enter your email address below.

About the Author

Eric Sheldon

Eric Sheldon

Eric Sheldon is a certified public accountant with more than 25 years of experience in a wide variety of industries. He's the owner/operator of Eric Sheldon CPA, PC, an accounting firm that specializes in providing tax strategy and preparation, accounting, and bookkeeping services to individuals and small business owners.

More information:

Dollar money bag and red arrow down. Economic decline. Depreciation of national currency. Devaluation. Crisis and economic shock. Discount rate reduction. Deterioration of economy growth forecast.

Can you legally avoid Depreciation?

It is true you could legally avoid depreciation. However, if you depreciate every year it will put yourself at a disadvantage and lose the opportunity to claim tax benefits. Depreciation will not be avoided and when you sell the property you must “recapture” all the depreciations regardless whether or not you took it. This can

Read More »
close up of hand with smartphone and bitcoin

Virtual Currency

Virtual Currency (Cyrptocurrency) is considered very secure because they use strong cryptography to verify the transfer of assets. When you buy and sell virtual currency, blockchain is used to record the transaction. Unlike transactions in stocks where you have a few lines listing Sale Amount and Date vs. Purchase Amount Date, blockchain can have a

Read More »
Defense and PIN code entry panel abstract background.

You should consider the IP PIN opt-in

It is a pointy situation, but you should consider the IP PIN opt-in program Identity Protection PIN are not just for individuals who experienced identity theft. Starting in 2021, there is a volunteer program to opt into the IP PIN program to protect yourself from tax-related identity theft. I encourage anyone to opt-in because there

Read More »