(CNSNews.com) - The tax reform bill that the House Ways and Means Committee released today slashes in half the size of a mortgage that qualifies for the mortgage-interest deduction from federal income taxes.
It also eliminates the provision in current law that allows a taxpayer to deduct the mortgage interest on a secondary residence as well as their principal residence home.
Under current law, taxpayers can deduct the mortgage interest on mortgage debt up to $1,000,000. Under the Republican proposal, a taxpayer will only be able to deduct the mortgage interest on mortgage debt of $500,000 or less.
Also, a married person filing singly will only be able to deduct the interest on a mortgage of $250,000.
This change in the deductibility of mortgage interest is made in Section 1302 of the bill.
The official summary of the bill, published by the Ways and Means Committee, explains both the relevant provision in current law and how the Republican bill will change that provision.
This is how it explains the current law:
“Under current law, a taxpayer may claim an itemized deduction for mortgage interest paid with respect to a principal residence and one other residence of the taxpayer. Itemizers may deduct interest payments on up to $1 million in acquisition indebtedness (for acquiring, constructing, or substantially improving a residence), and up to $100,000 in home equity indebtedness.”
And this is how it explains what the Republican tax-reform bill would do:
“Under the provision, a taxpayer may continue to claim an itemized deduction for interest on acquisition indebtedness. For debt incurred after the effective date of November 2, 2017, the $1 million limitation would be reduced to $500,000. Interest would be deductible only on a taxpayer’s principal residence. Similar to the current-law AMT rule, interest on home equity indebtedness incurred after the effective date would not be deductible. In the case of refinancings of debt incurred prior to November 2, 2017, the refinanced debt generally would be treated as incurred on the same date that the original debt was incurred for purposes of determining the limitation amount applicable to the refinanced debt. In the case of a taxpayer who enters into a written binding contract before November 2, 2017, the related debt would be treated as being incurred prior to November 2, 2017.”
This is how the Ways and Means Committee summary explains the change in the size of the mortgages that will be eligible for a mortgage interest deduction: