We're about to buy a house and have applied for a mortgage that's a little above $500K.
I keep reading about a possible $500K cap to deduct mortgage interest (Per Simpson-Bowles), but does that mean you would be able to write off the interest for the $500K and only lose the deduction above that amount or if you're mortgage is above $500K you can't write off anything?
One never knows what the President will do. however, it is likely to have a sliding scale up to 500K. For example, the first 200k is 100% deductable, the next 200K is 50% deductable and the last 100K is 25% deductable. This is normally what is called phased out deduction.
However, with this president, you cannot know until it is law.
I doubt this will happen, this is something Romney was talking about. Their plan was to cap deductions to something like 17k.
So if you had more than 17k in interest you would not be able to write it all off.