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We plan to refinance our mortgage and we are aware that

under the new tax code...
We plan to refinance our mortgage and we are aware that under the new tax code the maximum amount deductible for 'new mortgages' is $750K. We are also aware of a grandfathering rule but not sure if it applies to refinanced mortgages.
Our original mortgage loan was acquired in 2015, and it is currently more than $1M. If we refinance it, what will be the maximum amount deductible for the 2018 tax year and later: $750K (as in the new tax code) or $1M (as in the old tax code)?
Thank you,
Dan
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Answered in 14 minutes by:
3/28/2018
Lev
Lev, Tax Advisor
Category: Tax
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See here

section 163(h)(3) Qualified residence interest

https://www.law.cornell.edu/uscode/text/26/163

(F) Special rules for taxable years 2018 through 2025

(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.

.

So far - when refinancing - as long as refinanced amount is not more than your original mortgage - we may use $1,000,000 limitation as set prior of 2018.

Questions?

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Customer reply replied 1 month ago
What happens after 2025?

That provision was implemented temporary till 2015.
Under current statute - it will expire in 2025 - and the old provision will be in effect.

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Customer reply replied 1 month ago
I take it that refinancing will not affect us as we can still use the $1M limitation until 2025 and beyond under the new tax code.

That is correct - refinancing will NOT affect you in your current situation.

and we need not to worry about 2025 as situation might be very different by that time.

Lev
Lev, Tax Advisor
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Customer reply replied 1 month ago
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