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Get the Most Out of Your Home Purchase with These Tax Tips!

In this video, I share a tax-saving strategy that allows you to maximize deductions when purchasing a home. If you’re looking to optimize your tax benefits, understanding the difference between mortgage interest deduction and investment interest deduction is important to effectively execute this strategy. The mortgage interest deduction is limited to loans of $750,000 or less under current tax laws, often leaving homeowners with unused interest expenses that don’t qualify for tax deductions.

However, by utilizing a cash-out refinance and adhering to IRS interest tracing rules, you may be able to classify your loan interest as an investment interest rather than a mortgage interest. This method could let you deduct the full amount of interest paid, potentially avoiding the mortgage interest deduction cap.

I explain the process of refinancing your home and using the loan proceeds for investment purposes like stocks, bonds, mutual funds, or ETFs.

Part of the success with this approach is keeping the loan proceeds exclusively for investment purposes. Using the funds for personal expenses like buying a car could disqualify you from some of the tax benefits. It’s important to track the use of your funds and properly report everything to stay compliant with IRS rules.

Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.