However, it will be subject to stricter requirements. The Tax Cuts and Jobs Act of 2017 eliminates the deduction for interest paid on home equity loans and lines of credit for tax years 2018-2026 unless you those funds are used to purchase, renovate or substantially improve your primary or second home.
The deduction amount includes the interest you pay on your mortgage, home equity loan, home equity line of credit (HELOC) or mortgage refinance. If you took on the debt before Dec. 15, 2017, you can deduct interest on $1 million worth of qualified loans for married couples and $500,000 for those filing separately for the 2018 tax year.
Interest on home-equity loans can be tax deductible. But experts warn that although going that route may result in paying less tax, there are risks. The house is the guarantee on the loan, not the car.
The IRS allows you to deduct mortgage interest on a first mortgage but no longer can people deduct their home equity loan interest. Being able to do this is a major advantage of home ownership. Many homeowners cherish the ability to have their home equity loan interest be tax deductible, but that is all about to change in 2018.
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Homeowners with home equity loans may be reaping the benefits of deducting interest paid in 2017, but they shouldn’t get used to it. The Republican tax reform law killed the interest deduction on.
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The answer to the question of whether interest on a home equity line of credit is tax deductible is maybe. If you need cash and have equity in your home, a home equity loan or line of credit can.
The end result is that any interest paid on the first $60,000 of debt principal will be acquisition indebtedness (a refinance of the prior acquisition indebtedness), but any interest on the additions to the debt principal (at $300/month in loan payments) will be home equity indebtedness payments.
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Generally speaking, interest on home equity loans is tax-deductible, as is the interest paid on the primary mortgage you used to buy your home. However, there are some significant differences worth noting. Not taxable as income. There are two other tax matters to get out of the way before we talk about deductions, though.