How Will the New Mortgage Interest Deduction Change Affect You?

Mortgage Interest Deduction

• The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.
• Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
• The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
• Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
• This will have a big impact on our Bay Area housing since our average home prices are high. We may see some reduced prices on the high end, but I don't expect much change on entry or mid-level homes. 
• The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes.
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