Trying to remember Mortgage

[rfk]

interest deduction amount(s) that can be deducted on schedule A. That is, I know about the $1.1mm, but the limitation if refinancing, etc occurs through the life of a client's personal residence. I am not sure at this juncture how complicated it is with regard to refi, etc., if at all.

Involved with this question are the aspects of acquisition debt and the like. My client had about $24k of mortgage interest in 2008 (not necessarily a big deal), but want to make sure that I am not missing something finalyzing his "late filing '08" personal return. Also if (not sure at this point) he refinanced and took money out to put money in his S-Corp, what should I look for? I believe that this limits the percentage deductible on his schedule A or not? Just cannot seem to remember this stuff at this moment.

Thanks for your help! Would appreciate your time and comments.

rfk

[JG EA]

Zero replies

Since no one has replied I will.

CFS has a nice flow chart: But there is a chart in Pub 936 also.
First ask If all loans secured by 1st and 2nd home $100,000 or less? (check on FMV limits)
If so it is OK
If No Is the loan old - before Oct 1987?
If so it is OK (unless loan is over FMV).
If not ask :All money used to Buy/Build/Improve the 1st or 2nd home (and secured by)?
If they say Yes, then ask Is the loan $1,000,000 (MFJ) or less?
If so then it is OK (unless loan is over FMV).

If some of their loan is equity then the next question is the equity part $100,000 or less?
(limited to FMV minus home acquisition debt)

If it doesn't fall into that range then go to pub 936 and do the tables to see how the deduction is limited.

Notice that home acquisition debt stays the same (unless new monies are used to buy, build, improve). So the balance of the old loan will be larger with the closing costs when refinanced. Basically making most of those costs Equity Debt. See page 8

Also note that you can't add home equity debt on AMT.

This requires careful tracking of this type of debt unless it is clear that home equity debt is under $100,000 (or limit of FMV,,,,) CFS also has a wonderful worksheet for this.

People don't even tell you about refi's they just hand you their 1098. So, every year we need to ask if there were any refi's.

[S T]

Requesting

I have several of these, and still unsure whether or not I am calculating correctly, but at least I am acknowledging and giving it my best effort.

Since, my clients mostly are "long term clients" I request copies of escrow/closing statements each year and have been trying to track refinances. So now for the last 5-6 years I do have copies of refinances and able to track money out accounting for and exceeding the $100,000 equity - and then some have been combination with money out going to pay off debt and also home improvement. It is a "HEADACHE" and you do need a very large bottle of "Tylenol" at hand.

So yes, JG is correct, as I am a CFS subscriber as well and, I DO NOT know how I would have tracked these loans without CFS and those worksheets Albeit probably not perfect

What I am unclear on is how in the world are we to account for the "negative amortization" loand on refi's - probably another thread should be started on that topic.

I keep hoping that IRS or the "powers to be" would make it less uncomplicated on this issue - it is a thorn in my side for sure

Sandy