2018 Annual Housing Recap Report Released
Interest Deductions May Continue for Home Equity Credit Lines
Posted: January 30, 2018
The new tax law eliminated a long-standing section of the tax code that allowed homeowners to borrow against the equity in their homes and use the proceeds for whatever purposes they chose while deducting the interest payments on their federal taxes. That provision of the new tax law took effect January 1, 2018, so it's been assumed by many that tax-deductible home equity lines of credit (HELOCs) no longer will be available.
However, that is not entirely true. Interest-deductible HELOCs and second mortgages should still be available to homeowners provided (1) they use the proceeds of the loan to make "substantial improvements" to their home, and (2) the combined total of their first mortgage balance and their HELOC or second mortgage does not exceed the new $750,000 limit on mortgage amounts qualified for interest deductions.
The key is that the homeowners must limit expenditures to capital improvements on their house, or for buying or building their principal residence. As always, homeowners should discuss the eligibility of a HELOC or second mortgage for interest deductions with their tax professional.
Article from MLS.