If you own a home, you may be one of the millions of people who count on the home mortgage interest deduction when you file your income taxes.
In most cases, it allows borrowers to deduct all of the interest paid on their home loans.
Changes coming to mortgage interest tax deduction?
The deduction is popular with homeowners, and it’s also used by real estate agents to convince renters who may need an extra incentive to buy a place.
So it should be no surprise that the real estate industry opposes any changes to the status quo.
During the race for the White House, President-elect Donald Trump put forward a tax plan on his website that he says will simplify the system and “reduce taxes across-the-board.”
“We’ll cap the mortgage interest, but we’ll allow some deductibility,’ said Trump’s Treasury pick Steven Mnuchin on CNBC.
In fact, there is already a limit to the amount a taxpayer can deduct, but few people make it to that cap. Here’s the fine print from the IRS on what can be deducted:
Mortgages you (or your spouse if married filing a joint return) took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2016 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
Mnuchin suggested capping deductions at $100,000, which CNBC reports would likely affect only a small percentage of homeowners.
Millions of homeowners don’t take advantage of this deduction as it stands because they don’t itemize or they don’t pay federal taxes. Others have already paid off their mortgages.
CNBC reports that the ‘vast majority’ of those who benefit earn $100,000 or more.
While we wait for specifics on President-elect Trump’s tax plan, the most important thing to remember is that there are no changes to the mortgage interest deduction for the upcoming tax season.
Use this calculator from Bankrate.com to see how much money the deduction can save you.