INTEREST AND TAXES

Now that tax season is officially over, except for those taxpayers on extension, we can turn our attention to how the new tax law is affecting all of us. 

We have all been told that the mortgage interest deduction on Schedule A (Itemized Deductions) is limited to the first $750,000.00 of mortgages starting in 2018.  You can deduct any amount of interest, subject to IRS limitations, as Mortgage Interest on rental properties.  The $750,000.00 does not apply here.  Also, if you take out a mortgage and invest the money you can, again with IRS limitations, deduct that interest as Investment Interest Expense elsewhere on the tax return. 

Dealing with the Itemized Deduction for taxes on Schedule A we all have been made aware that the limit on that deduction is $10,000.00 for all taxes.  But, real estate taxes can be deducted, without limitation, on rental properties, investment properties or properties used in a trade or business. 

Please check with your CPA to get a better understanding of how these laws affect your tax return.

 Editorial Comment: I do not think that these limitations on interest and taxes will last forever.  I think that after the midterm elections there will be changes to the tax laws once again.