The Mortgage Interest Deduction May Be a Great Tax Planning tool as long as you understand what you are working with.
In order to use the mortgage interest deduction, the mortgage must be secured by a Qualified Home:
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.
Second home. A second home is a home that you choose to treat as your second home.
As a reminder, the Tax Cuts and Jobs Act passed in December 2017, made several significant changes to the individual income tax including the mortgage interest deduction.
Mortgage Interest Deduction & Divorce
When one spouse is required to refinance the marital home in order to pay the vacating spouse their share of equity, it is referred to as an "Equity Buy-Out." This mortgage refinance will be considered acquisition indebtedness because the borrowing spouse is 'acquiring' the other spouse's share of ownership. Any equity taken out of the home for any other reason other than the equity buyout may be considered Home Equity Indebtedness and may not currently qualify for the mortgage interest deduction.
Always work with a Certified Divorce Lending Professional (CDLP) when going through a divorce and real estate or mortgage financing is present.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations.
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