[quote=SK in CV][quote=bearishgurl]As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.
Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]
Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.
The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.[/quote]
SK in CV, I see this is where to “plug the hole” then. There comes a point where the interest deducted is exorbitant for daily living needs, such as those property owners who are deducting $100K+ annually (using interest from their principal-residence loans) off their incomes to arrive at their “taxable” incomes. Instead of having a “loan amount” cap, the IRS should use an “interest cap” of say $50,000 (on a luxury home). If the taxpayer’s property is “more luxurious” than that, they can AFFORD to eat the excess interest.
This would cut down on the issuance of usurious loans, too. They would no longer be attractive because they would no longer have preferential tax treatment for high-income borrowers.
