This is a great question because there is a misconception among homeowners that if you refinance your existing home mortgage, you will be subject to the new mortgage rules and not be able to deduct as much as you could before. This is incorrect. The Tax Cuts and Jobs Act (TCJA) which was passed in December 2017 did reduce the amount of mortgage interest a homeowner could deduct on their taxes to $750,000, down from $1 million (plus $100,000 of interest on a home equity line of credit), but that only affects new mortgages made after December 2017. The TCJA initially eliminated the deductibility of home equity line interest, but the IRS issued clarification on (February 21, 2018) stating that homeowners can still continue to deduct home equity loans as long as the loan is used to “buy, build or substantially improve the taxpayer’s main home and second home.” If you had a mortgage prior to the passage of TCJA, you are grandfathered into the old rules and can still deduct mortgage interest up to the old limit of $1 million, even if you refinance your loan.

Ara Oghoorian, CFA, CFP®, CPA is the President & Founder of ACap Asset Management.

ACap Asset Management, Inc. is a “Fee-Only” investment management firm headquartered in Los Angeles, CA specializing in helping doctors and healthcare professionals make sound financial decisions.

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