An attractive incentive to purchasing a home is the associated tax deductions.  One such deduction is the amount paid for mortgage interest.  The tax code states the interest paid on loans incurred to acquire, construct or substantially improve your main or second home may be deductible on your tax return subject to certain limitations.  To qualify for the tax deduction the loan must be secured by the home(s) and a married couple can only deduct the interest on a loan up to $1 million ($500,000 for single filers).

The IRS will allow you to deduct the interest on a home equity loan regardless of how the proceeds of the loan are spent.  This means you can borrow against your house and receive a tax deduction to pay for college, go on vacation, pay down credit card debt, etc.  This may be a good strategy for homeowners who have credit card debt at higher interest rates for which they receive no tax deduction.  A married couple can deduct interest on a home equity loan up to $100,000 while a single filer can deduct the interest on a home equity loan up to $50,000. 

When refinancing your home loans, be sure to consider the tax implications.  If a married couple refinances to a new loan with a balance $100,000 greater ($50,000 for single filers) than the principal outstanding on the old loan immediately before refinancing, a portion of the interest payments may not be tax deductible. 

The current tax environment is dynamic and changes will likely be made due to the faltering economy and the new administration.  If you plan to apply for an initial mortgage or refinance your current loan, you should always consult a qualified tax advisor to determine the implications of your specific situation.  Please do not hesitate to contact Jeffrey J. Zures, CPA, CFP of Sanchez & Zures, LLC at Jeff.Zures@SZadvisors.com or (703) 349-0330, extension 2.

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If you're Mukesh Ambani, one of the top five richest people in the world, you probably could afford to build the most expensive home in the world (exhibit A to the left).  Worth an estimated $43 billion, Ambani is building a 27-story, custom home costing ~$2 billion in downtown Mumbai, India, expected to be completed in January.  The home, named "Antilla," features a six stories of parking, a lobby with nine elevators, dual silver-covered staircases, a ballroom with a ceiling covered by 80% crystal chandeliers, a movie theater, a health spa with yoga studio, an indoor/outdoor bar, and a rooftop terrace overlooking Mumbai and the Arabian Sea!  You can read about the 550 feet high and 400,000 square feet property at Forbes Magazine.