Final answer:
The maximum amount of acquisition debt for which taxpayers can deduct mortgage interest on their taxes is $1,000,000. This deduction applies to mortgages taken out to buy, build, or improve a qualified home. Note that after 2017, the deduction for home-equity debt interest is only available if the loan is used for the same purposes.
Step-by-step explanation:
The maximum amount of acquisition debt for which taxpayers can deduct mortgage interest is $1,000,000. This means that if you have a mortgage to buy, build, or improve your home, and that mortgage does not exceed one million dollars, the interest you pay on that mortgage is generally deductible on your taxes. This limit applies to the mortgages taken out after October 13, 1987, to buy, build, or improve a qualified home. It is important to note, however, that the deductible interest is only applicable if the loan is secured by your home and the funds are used for its acquisition, construction, or substantial improvement.
For home-equity debt, the deduction is limited to the interest on up to $500,000 of debt (for singles and married filing separately) or $1,000,000 (for married filing jointly) but is no longer available after the Tax Cuts and Jobs Act of 2017, unless the debt is used to buy, build or substantially improve the taxpayer's home that secures the loan. As you build equity and make mortgage payments, you are also building your credit score, which is a side benefit of homeownership.
Homeowners must understand the terms of their mortgage, including the interest rate, payment schedule, and how much of their payment goes toward the principal versus interest. This knowledge can help homeowners plan their finances, maximize the benefits of homeownership, and understand their potential tax deductions.