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Step 1
Review your mortgage situation if you plan to refinance your mortgage during the year. The refinanced mortgage cannot exceed the original mortgage balance plus an additional $100,000 to get a full interest deduction subject to the maximum limitations.
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Step 2
Take out a separate home equity loan up to $100,000 if you want to deduct interest above the amount allowed for refinanced mortgages as noted in Step 1. If the home equity loan interest rate is higher than the mortgage refinance rate you will have to compute the tax advantage of that deduction, at your highest tax rate, compared to the additional interest cost.
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Step 3
Verify that the mortgage on your main home, or combined with a mortgage on a second home, is not in excess of the $1,000,000 limitation and that the loan totals do not exceed the fair market value of the property to avoid interest which is partially not deductible.
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Step 4
Determine if the mortgage interest statements which are sent to you by the lenders after year end need to be adjusted for deduction purposes due to exceeding limitations per Steps 1 to 3 above. This will not be a problem if your original mortgages and refinanced amounts stay within the limitations.











