The home equity loan tax deduction is different for tax years 2018 and beyond. This page remains to describe how things used to work, but it’s more important than ever to review your financial situation and your deductions with a tax professional before making big decisions.
The new Tax Cuts and Jobs Act (TCJA) scales back or eliminates several itemized deductions, including deductions for qualified mortgage interest. Notably, interest paid on home equity debt is no.
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Home equity loan tax deduction. With a home equity loan, which is often referred to as a “second mortgage,” you receive a lump-sum payment based on your equity that will need to be paid back over the life of the loan. As with HELOCs, home equity loan interest is tax-deductible only if it’s used for buying, building, or renovating your home.
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Interest paid on home equity loans that aren’t considered home acquisition debt will no longer be tax deductible under the GOP tax plan. Currently, homeowners can deduct interest on up to $100,000.
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Yes, the interest paid on home equity loans and home equity lines of credit is still tax deductible, even in 2018 and beyond. However, it will be subject to stricter requirements.
The laws have recently changed due to the legislation called the Tax Cuts and Jobs Act. In most cases, it's now harder to deduct loan interest.
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However, the interest on HELOC money used for capital improvements to a home is still tax-deductible, as long as it falls within the home loan debt limit. Dates are important here, too. If you used a HELOC for home improvement before December 15, 2017, it would be grandfathered in to the $1 million limit.
In all of the above cases, the interest that you pay on the HELOC will be fully tax-deductible. Limitations apply when money is borrowed that is not used in connection with either purchasing or improving the home. Using a HELOC for Purposes Unrelated to Your Home This is where the HELOC interest may not be tax deductible.
To deduct the interest paid on your home equity line of credit, known as a HELOC, or on a home equity loan, you’ll need to itemize deductions at tax time using IRS Form 1040. That’s worth.