Becoming a homeowner allows you to escape the overpriced rental market, gives you the freedom to customize the space, and even offers some tax benefits to reduce what you owe to the IRS. Unfortunately, the 2018 Tax Cuts and Jobs Act changes some aspects of the mortgage deduction that homeowners took advantage of during their tax return preparation. Here’s what you need to know about the changes and how it could impact your return and overall tax liability.

What You Should Know About Mortgages & Your Tax Return Preparation

Lower Limits on New Mortgage Interest

For homeowners who took out a home loan after December 16, 2017, you can deduct mortgage interest paid on amounts up to $750,000. This is lowered from the previous limit of $1 million. For homeowners looking to take advantage on the mortgage interest on multiple investment properties or those who financed a high-price home in the hopes of reducing their tax liability, this change means you’ll be able to deduct far less than in previous years.

Furthermore, if you’re married and filing separately on your taxes, that limit is even lower. For these homeowners, the maximum loan amount decreases to $375,000. In previous years, taxpayers that were married but filing separately could deduct interest off of $500,000.

Older Mortgages Are Grandfathered In

Luckily, if you took out a home loan before December, 16, 2017, your mortgage deduction limits remain unchanged. You can deduct interest on loan amounts up to one million dollars for single homeowners and those that are married and filing jointly. Additionally, if the purchase was under a binding contract prior to the December deadline and you closed on the property no later than April 1, 2018, your deductions will be grandfathered in as well. Keep in mind that if you’re not itemizing deductions on your taxes, the mortgage deductions won’t impact your tax return preparation.

With changing tax laws and deduction amounts, it’s best to consult an experienced accountant prior to filing your return. At Burch & Associates, Inc. in Lincoln, NE, their dedicated tax services team will help you get the most out of your taxes this year. Their accountants and tax return preparation specialists understand the current changes and will do everything they can to identify ways to save on your return. Learn more about their services by visiting their website and call (402) 483-4791 to schedule a consultation for your upcoming tax season.