Cash Now - Mortgage Later?

You might think that a person who pays cash doesn't have many concerns or at least not the same ones as most people. Roughly 9% of people paid cash for their home last year with a considerably higher percentage paying cash this year.

The first question that comes to mind when we hear someone say they want to pay cash for a home is "Do you think that you might put a loan on the home in the future?"  Paying cash may affect your ability to deduct the interest on a mortgage placed on the home at a later date.

Currently, a homeowner may deduct the interest on up to $1 million of acquisition debt.  Paying cash for a home establishes acquisition debt at $0.  At that point, the only deductible interest would be home equity debt which is limited to $100,000 over acquisition debt.  You can get more information about this from IRS Publication 936.
 

On the surface, paying cash certainly seems simple but it may have consequences later.  At Triplett, we can point out the areas when advice from a tax professional is in order.