CMPS Mortgage and Tax Strategies 2

Question 1

A borrower pays $18,000 in mortgage interest and $4,500 in property taxes in 2024. What is the maximum combined SALT deduction they can claim?

Accepted Answer

$10,000 combined

Answer

The Tax Cuts and Jobs Act caps the state and local tax (SALT) deduction at $10,000 per year for all filing statuses except married filing separately.

Question 2

Which IRS form does a lender use to report mortgage interest paid by a borrower exceeding $600 in a tax year?

Accepted Answer

Form 1098

Answer

Lenders issue IRS Form 1098 (Mortgage Interest Statement) to report mortgage interest of $600 or more paid by a borrower during the year.

Question 3

A married couple files jointly and has $850,000 in acquisition debt on their primary home originated in 2018. How much of the mortgage interest is deductible?

Accepted Answer

Interest only on $750,000

Answer

For loans originated after December 15, 2017, the mortgage interest deduction is limited to the first $750,000 of acquisition debt for joint filers.

Question 4

A homeowner takes a $50,000 HELOC to fund a vacation. Under current tax law, how is the interest treated?

Accepted Answer

Not deductible because proceeds were not used to buy, build, or improve the home

Answer

Post-TCJA, HELOC interest is only deductible if the funds are used to buy, build, or substantially improve the taxpayer's qualified residence.

Question 5

What is the primary tax advantage of a mortgage on a rental property compared to a primary residence mortgage?

Accepted Answer

Interest is fully deductible as a business expense on Schedule E

Answer

Mortgage interest on a rental property is a business expense reported on Schedule E and is not subject to the $750,000 acquisition debt cap that applies to personal residences.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Mortgage and Tax Strategies 2