Sec. 602. Replacement of mortgage interest deduction with mortgage interest credit
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Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section: In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of the qualified residence interest paid or accrued during the taxable year. For purposes of this section— The term qualified residence interest means interest which is paid or accrued during the taxable year on— acquisition indebtedness with respect to any qualified residence of the taxpayer, or home equity indebtedness with respect to any qualified residence of the taxpayer.
For purposes of the preceding sentence, the determination of whether any property is a qualified residence of the taxpayer shall be made as of the time the interest is accrued. The aggregate amount of indebtedness taken into account for any period for purposes of this section shall not exceed $500,000 ($250,000 in the case of a married individual filing a separate return). The term acquisition indebtedness means any indebtedness which— is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and is secured by such residence.
Such term also includes any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence), but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness. The term home equity indebtedness means any indebtedness (other than acquisition indebtedness) secured by a qualified residence to the extent the aggregate amount of such indebtedness does not exceed— the fair market value of such qualified residence, reduced by the amount of acquisition indebtedness with respect to such residence.
The aggregate amount treated as home equity indebtedness for any period shall not exceed $100,000 ($50,000 in the case of a married individual filing a separate return). For purposes of this section— The term qualified residence means— the principal residence (within the meaning of section 121) of the taxpayer, and 1 other residence of the taxpayer which is selected by the taxpayer for purposes of this subsection for the taxable year and which is used by the taxpayer as a residence (within the meaning of section 280A(d)(1)).
If a married couple does not file a joint return for the taxable year— such couple shall be treated as 1 taxpayer for purposes of paragraph (1), and each individual shall be entitled to take into account 1 residence unless both individuals consent in writing to 1 individual taking into account the principal residence and 1 other residence. For purposes of paragraph (1)(B), notwithstanding section 280A(d)(1), if the taxpayer does not rent a dwelling unit at any time during a taxable year, such unit may be treated as a residence for such taxable year.
Indebtedness shall not fail to be treated as secured by any property solely because, under any applicable State or local homestead or other debtor protection law in effect on August 16, 1986, the security interest is ineffective or the enforceability of the security interest is restricted. For purposes of determining whether any interest paid or accrued by an estate or trust is qualified residence interest, any residence held by such estate or trust shall be treated as a qualified residence of such estate or trust if such estate or trust establishes that such residence is a qualified residence of a beneficiary who has a present interest in such estate or trust or an interest in the residuary of such estate or trust.
In the case of any taxable year beginning in calendar years 2016 through 2020, the taxpayer may elect to apply this section in lieu of the deduction under section 163 for qualified residence interest. . Section 163(h) of such Code is amended by adding at the end the following new paragraph: In the case of any taxable year beginning in a calendar year after 2015, the amount otherwise allowable as a deduction by reason of paragraph (2)(D) shall be the applicable percentage of such amount.
For purposes of subparagraph (A), the applicable percentage shall be determined in accordance with the following table: For taxable years beginning in calendar year: The applicable percentage is: 2016 100% 2017 80% 2018 60% 2019 40% 2020 20% 2021 and thereafter 0%. . Subparagraph
(B)of section 163(h)(3) of such Code is amended by adding at the end the following: In the case of any taxable year beginning in calendar years 2016 through 2020, clause
(ii)shall be applied by substituting the amounts specified in the table in subclause
(II)of this clause for $1,000,000 and $500,000 , respectively. For purposes of subclause (I), the amounts specified in this subclause for a taxable year shall be the amounts specified in the following table: For taxable years beginning in calendar year: Amount substituted for $1,000,000: Amount substituted for $500,000: 2016 $1,000,000 $500,000 2017 $900,000 $450,000 2018 $800,000 $400,000 2019 $700,000 $350,000 2020 $600,000 $300,000. . The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after section 25D the following new item: Sec. 25E. Interest on indebtedness secured by qualified residence. . The amendments made by this section shall apply with respect to interest paid or accrued after December 31, 2015.