New Tax Law Cracks Down on Home Mortgage Interest

Article Highlights:

  • Acquisition Debt Interest 
  • Equity Debt Interest 
  • Consumer Interest 
  • New Tax Law Changes 
Note: The is one of a series of articles explaining how the various tax changes made by the GOP’s Tax Cuts & Jobs Act (referred to as the “Act” in the article), passed late in December 2017, might affect you and your family in 2018 and future years, and offering strategies you might employ to reduce your tax liability under the new tax laws.

For years, taxpayers have been able to deduct home mortgage interest on their primary and second homes as an itemized deduction, subject to certain limitations. The interest deduction was limited to the interest on up to $1 million of acquisition debt and $100,000 of equity debt.

Acquisition debt is debt incurred to purchase, construct or substantially improve a taxpayer’s principal or second home. So when you purchased your home, that original loan was acquisition debt, and if you later borrowed additional money that you used to add a room, pool, etc., that loan was also acquisition debt. However, if the total of all of your acquisition loans exceeded the $1 million limit, then the interest on the excess debt over $1 million was not deductible as acquisition debt interest.

Consumer debt interest, such as interest on auto loans and credit card debt, is not deductible as an itemized deduction. However, years ago, Congress allowed homeowners to deduct the interest on up to $100,000 of equity debt. This allowed homeowners to use the equity in their homes for any purpose and deduct the interest on the equity debt as an itemized deduction.

Well, That Has All Changed. For 2018 through 2025, the new tax law reduces the $1 million limit on home acquisition debt to $750,000 ($375,000 for married separate filers), except that the lower limit won’t apply to indebtedness incurred before December 15, 2017. That is, the $1M cap continues to apply to acquisition mortgages on primary and second residences that were already in existence prior to December 15, 2017, as well as for taxpayers who entered into a binding written contract before that date to close on the purchase of a principal residence before January 1, 2018, and who purchase that residence before April 1, 2018.

The Equity Debt Interest Deduction Is No More – Congress has yanked the rug out from under those with equity debt on their homes. Beginning in 2018, interest paid on equity debt will no longer be allowed as a deduction, regardless of when the debt was incurred.

This seems a little unfair and can have an adverse impact on individuals who used their home as a piggy bank for personal expense purposes.

Whether any of this makes any difference in light of the new higher standard deduction amounts for 2018, and whether you should be looking for ways to pay down the equity debt, will depend upon the amounts of your other itemized deductions. Please call this office if you have questions.



Share this article...

Sign up for our newsletter.

Each month, we will send you a roundup of our latest blog content covering the tax and bookkeeping tips & insights you need to know.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

We care about the protection of your data.

Junglebooks Affiliate Program

Why Partner with Us?

With years of experience and a team of certified professionals, we deliver exceptional results to our clients.

Industry-Leading Expertise

Our firm is a leader in the accounting industry, providing comprehensive services that include tax preparation, bookkeeping, financial planning, and business consulting. With years of experience and a team of certified professionals, we deliver exceptional results to our clients.

Attractive Commissions

We value our affiliates and offer competitive commission rates for every client you refer who signs up for our services. The more clients you refer, the more you earn.

Comprehensive Support

We provide our affiliates with all the resources needed to succeed, including marketing materials, dedicated support, and regular updates on our services. You’ll have everything you need to effectively promote our firm and earn commissions.

Trusted Reputation

Our firm has built a solid reputation for excellence and trustworthiness. When you refer clients to us, you can be confident that they will receive the highest level of service and satisfaction.

Frequently Asked Questions

This firm prepares tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Our firm’s seasoned professionals are experts in all areas of taxation including:


  • Individual Returns
  • Payroll Tax Issues
  • Business Returns
  • Sales Tax Returns
  • Rental Income Returns
  • Business Consultation
  • Expatriate Returns
  • Fiduciary & Estate Returns
  • Corporation Returns
  • Bookkeeping
  • Partnership Returns
  • LLC Returns

Our firm offers a full range of planning services including, but not limited to:


  • Individual Tax Planning
  • Business Tax Planning
  • Business Organization
  • Rental Properties
  • Foreclosures and Repossessions
  • Retirement
  • Investments
  • Sales and Exchanges
  • Pension Plans
  • Education Planning
  • Finance & Refinance Planning
  • Home Purchase and Sale Planning
We are here for you twelve months a year, not just during tax season. Whether you have a simple tax question, need advice on the tax implications of a business decision, or want clarification on a government notice, feel free to give us a call.
We maintain a policy of the strictest confidence concerning our clients’ affairs. You can rest assured that no one will learn about your business or tax status – even relatives, associates or friends who might have referred you to us.