Question

TCJA mortgage deduction for grandfathered loan and 2nd home

Forum|Forum|6 years ago
May 29, 2020
1 reply
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We have a loan that was initiated prior to 2017- so it has the grandfathered limit of $1M.

We are considering buying a second home for our own use (not renting it out).

What limit will apply for deduction of mortgage interest if we have one grandfathered loan (pre-Dec 2017) and a new loan (2020)?

One loan was originated for $580k in 2015, and the new loan for the vacation home will originate in 2020 and my be around $300k.

Will the $1M limit apply or the $750k limit apply for mortgage interest deductible- given that one of the loans is grandfathered?

TurboTax Free Edition Online

VictoriaD75

The limits are reduced (but not below zero) by the amount of your grandfathered debt. Grandfathered debt isn't limited. All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. However, the amount of your grandfathered debt reduces the limit for home acquisition debt.

IRS Publication 936 has a mortgage interest deduction worksheet on page 12 that addresses this issue and will help you calculate the amount of deductible mortgage interest.

IRS Publication 936

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