Generally, for mortgages obtained after December 15, 2017, you can deduct all of the interest you pay on a home mortgage, up to $750,000, as long as the funds were used to buy, build, or maintain your primary or second home. For mortgage indebtedness incurred prior to December 16, 2017, the limit is $1 million. If you already own a home that you wish to remodel, a home equity line of credit (HELOC) may be used to pay for your remodel. The interest on the HELOC is 100% deductible, as long as the HELOC and primary mortgage together don’t total more than the limit, and the loans were used to buy, build, or maintain the property. Any interest paid on the portion of the loans over the $750K or $1 million limit is not tax deductible. Beware that if you pay cash for the remodel (or for a home for that matter), you can’t later take out a loan and deduct the interest, since “non-acquisition indebtedness” is not tax deductible.
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