As a taxpayer, you are likely aware of the fact that you can
deduct interest expenses in some cases. Generally, areas in which you can
deduct interest expenses include:
l Student
loan interest
l Personal
interest
l Qualified
resident indebtedness interest
l Business
interest
l Investment
interest
And, while it’s been the case that you can deduct interest
in these areas for quite some time, there are some new rules affecting the 2018
tax year. These rules are being put into play by the Tax Cuts and Jobs Act.
New Rules to Know
One big change is a lowering of the acquisition indebtedness
limit on qualified resident indebtedness. This limit has been lowered to
$750,000 for any loans that were taken out of after December 15 of 2017.
Something else to take note of is the fact that the separate
deduction for home equity indebtedness is no longer in effect or available.
Further changes include that you can no longer deduct
investment expenses when calculating net investment income while determining
your deduction for investment interest. Also, a new rule says that if any debt
funds are ultimately used for multiple purposes, the interest on the debt has
to be allocated in the same way.
All of these rules just apply to individual taxpayers, while
business taxpayers have their own set of new rules to follow.
Obviously, with so many changes and with these rules being
so complex, it’s a good idea to seek some professional advice when determining
if and how the new requirements affect you. Having an accountant or a good
financial adviser is the best way to navigate these changes, as well as other
changes that are now in play for the 2018 tax year, which is quickly coming to
an end.