So beginning in 2018 interest on home equity loans and helocs classified as home equity indebtedness will not be tax deductible. From 2018 through 2026 the interest deduction on home equity debt including home equity loans and helocs has been eliminated for all expenses aside from costs incurred to purchase substantially improve or renovate underlying property.
A home equity loan allows you to borrow against the value of your home by taking out a second mortgage.
Home equity debt deduction 2018. This change will affect both new and existing home equity loans. For example a mortgage you took out during the year is a mixed use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home home acquisition debt and partly to buy a car home equity debt. The new tax law suspends the deduction for home equity interest from 2018 to 2026 unless the loan is.
Any eligible deduction will be limited to the original purchase price of the underlying home. Home equity interest may still be deductible in many cases according to the irs even though the tax deduction for home equity interest was eliminated by the tax cuts and jobs act of 2017 tcja. 22 suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit unless they are used to buy build or substantially improve the taxpayers home that secures the loan.
For 2018 2025 the tcja generally eliminates the prior law provision that allowed you to claim itemized qualified residence interest deductions on up 100000 of. But if youre paying off credit card debt you cant. Unfortunately for taxpayers that already have home equity loans and helocs outstanding the trump tax reform did not grandfather the deduction of interest for existing loans.
January 1st 2018 the tax deduction on a home equity loan will be changed. The new law appeared to eliminate the deduction for interest on a home equity loan home equity line of credit heloc or second mortgage sometimes called a re fi but some tax professionals. Tcja change for home equity debt.
The tax cuts and jobs act of 2017 enacted dec. Great news for millions of home equity borrowers in 2018 the tax deduction for home equity loan interest is staying sort of. An equity loan is a second mortgage used to borrow.