As we all
know, thanks to the GOP Tax Act taxpayers can only deduct mortgage interest
paid on debt used to “buy, build or substantially improve” a personal if they
itemize on Schedule A. Home equity
interest is no longer deductible.
In addition –
* The home being bought, built or improved must be used as the
security for the loan.
* If the homeowner defaults on the loan the home will be taken to
“satisfy” the debt.
* The loan must be recorded with the appropriate agency under state
law, usually at the county level.
We can no longer simply put the amount of mortgage interest
reported in Box 1 of a Form 1098 on Line 8 of Schedule A.
Thankfully, also due to the GOP Tax Act, most of our clients are no
longer able to itemize. But for those
who do the mortgage interest deduction is often the deciding factor.
It is clearly the responsibility of the taxpayer to keep separate
track of acquisition debt and home equity debt, going back to the original
purchase of the mortgage. The bank or
mortgage company will not do it, and it is not our responsibility. But I do not know of a single taxpayer who
actually does this.
I am interested in hearing how my fellow tax preparers deal with
this issue. What do you ask of your clients
when it comes to mortgage interest? And
what documentation do you require from them to determine deductible mortgage
interest?
I would also like to know if any of you have dealt with an IRS
audit of mortgage interest.
You can respond via a comment to this post or via email to rdftaxpro@yahoo.com with THE TAX
PROFESSIONAL BLOG in the Subject Line.
FYI, I have created a guide for DEDUCTING MORTGAGE INTEREST, with
forms and specific instructions for keeping separate track of mortgage debt, to
give to clients. I am offering reprint
rights to this guide that you can personalize and give to your clients for only
$14.95 ($11.25 for members of the National
Association of Tax Professionals – provide your membership number with your
order) , sent as a word document email attachment (the signed reprint
rights agreement will be sent via postal mail).
The guide also discusses in detail who can deduct mortgage interest, refinancing
and points.
If you want to see the guide before ordering reprint rights, I will
send you a copy of the public version, as a pdf email attachment, for only $2.00,
which can be deducted from the cost of the reprint edition if you decide to order.
Send your check or money order for $14.95 or $11.25 or $2.00,
payable to TAXES AND ACCOUNTING, INC, and your email address to –
TAXES AND ACCOUNTING, INC
DEDUCTING MORTGAGE INTEREST
POST OFFICE BOX A
HAWLEY PA 18428
I am looking forward to your responses.
TTFN
