To foster and encourage this dream, Congress has consistently enacted -- or preserved -- tax legislation which favors homeowners.
Thus, if in year 2018, your lender held in escrow moneys for taxes due in 2019, you cannot take a deduction for these taxes when you file your 2018 tax return.
Interest on mortgage loans on a first or second home is fully deductible, subject to the following limitations: acquisition loans up to $1 million, and home equity loans up to $100,000.
The additional $80,000 that you took out of your equity does not qualify as acquisition indebtedness, but since it is under $100,000, it qualifies as a home equity loan.
Several years ago, the Internal Revenue Service ruled that one does not have to take out a separate home equity loan to qualify for this aspect of the tax deduction.
However, if you had borrowed $200,000, you would only be able to deduct interest on $195,000 of your loan -- the $95,000 acquisition indebtedness, plus the $100,000 home equity.
Points paid to a lender when you refinance your current mortgage are not fully deductible in the year they are paid; you have to allocate the amount over the life of the loan.
For example, you paid $1700 in points for a 30 year loan.