Mortgage Interest Deduction

Technical topics regarding tax preparation.
#1
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Having a brain freeze here. Client purchases home Oct 2016 . Mortgage interest deduction limited to interest on 1,100,000

Refinances in 2019 and then again 2020. Does not take out any money. Still compute the mortgage interest on 1,000,000
or 750,000?

Thanks
Last edited by davidlat on 14-Oct-2021 6:25pm, edited 1 time in total.
 

#2
dave829  
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Assuming that the debt paid off in the refinance was over $1,000,000, the limitation is interest on $1,000,000. See 163(h)(3)(F).
 

#3
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Thanks I was thinking he still qualifies for the 1,000,000 . He falls under the old rules. I was getting thrown off by the refinance came while the new rules were in
 

#4
dave829  
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davidlat wrote:I was getting thrown off by the refinance came while the new rules were in

See 163(h)(3)(F)(iii):

(iii)Treatment of refinancings of indebtedness.---
(I)In general.---In the case of any indebtedness which is incurred to refinance indebtedness, such refinanced indebtedness shall be treated for purposes of clause (i)(III) as incurred on the date that the original indebtedness was incurred to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

(II)Limitation on period of refinancing.---Subclause (I) shall not apply to any indebtedness after the expiration of the term of the original indebtedness or, if the principal of such original indebtedness is not amortized over its term, the expiration of the term of the 1st refinancing of such indebtedness (or if earlier, the date which is 30 years after the date of such 1st refinancing).
 

#5
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Thank you sir. Greatly Appreciated
 


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