8035 / What is the “ninety-day rule” that may apply in determining whether mortgage interest may be deducted?

Editor’s Note: The 2017 tax reform legislation changed the rules governing the treatment of mortgage interest, home equity indebtedness interest and interest on debts to secure refinancing. See Q 8034 for details.

In order to be incurred to acquire, construct, or substantially improve a residence, a debt must (a) be traceable under the tracing rules of Temporary Treasury Regulation Section 1.163-8T to the purchase of a qualified residence, or (b) qualify under one of two 90-day rules.¹

The 90-day rule with respect to acquiring a residence provides that expenditures to acquire the residence within 90 days before or after the date the debt is incurred can be treated as incurred to acquire the residence.