I'm writing an article on the tax implications of taking money out of
a house: HELOC, 2nd mortgage, reverse mortgage, etc. I know these all
have important differences, but do they have different tax breaks? I'm
interested in any comments on this topic in this forum.
In addition, professionals who would be interested in being
interviewed for this article can let me know at firstname.lastname@example.org.
In article ,
A mortgage is a loan secured by the home.
A mortgage used to buy, build or improve the home is known as
acquisition debt and interest on acquisition debt of up to $1 million
of principal is deductible on Schedule A for regular income tax and
is not an AMT preference item. (AMT Preference items increase AMT Income
and thus may increase AMT.)
A mortgage used for any other purpose is known as Home Equity Debt and
interest on up to $100,000 of principal is detuctible on schedule A
and is an AMT preference item, so cannot be deducted for AMT purposes.
So just because you have negotiated a HELOC does not necessarily mean
that loan is a home equity loan; it depends on the use of those funds.
Second mortgages have different meanings depending how it is used.
Reverse mortgages add to the principal owed, and the interet accumulates.
Since none of the interest is paid out of pocket, none of that interest
>In addition, professionals who would be interested in being
>interviewed for this article can let me know at email@example.com.
It would be difficult to do more than scratch the surface of your
question without writing a partial draft of your article. I assume from
viewing your footprint on the web, you probably already know this.
To be thorough, your article would have to cover topics such as
allocation of loan proceeds and interest tracing (are the proceeds being
used to invest in a long-term asset?), loan collateral,
qualified home, marital and tax filing status of owner(s), limits on
mortgage interest deduction, refinancing and points, tax brackets and
Alternative Minimum Tax (AMT), and that's before we get to "special
situations" like below-market-interest loans and so on.
I'd love to see an article that helps inject some wakefulness into the
American Dream Of Home Ownership (ADOHO, or should that be A-D'OH!-O).
My favorite quote, from a prospective home owner, from Sunday's real
estate newspaper section:
"Buying a first home is supposed to be a really exciting thing to do for
a family, [but] all the hoops you have to jump through kind of take away
from that excitement."
Whoever said it was "supposed to be really exciting"??? It's more like
cleaning gutters, pulling weeds, filling out your Form 1040, and
updating your retirement and estate plan all on the same weekend--all
valuable activities, but certainly not exciting.