JUST CURIOUS

 

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