Deducting home equity line interest under the new tax code
Feb 27The original thought on home equity lines of credit was to provide homeowners the ability to tap their equity in their home to make improvements to their home. What ended up happening was many homeowners started using their home equity lines to buy cars and make big purchases. The interest that was deductible on credit cards had disappeared and those purchases were moved over to home equity lines so the interest was still deductible.
Congress wanted to limit these actions so they eliminated the deduction of interest on home equity lines. However, they did retain one feature. According to this article the tax deduction of this interest is still deductible under certain conditions.
….As in the past, home-equity loan proceeds used to substantially improve a home are considered acquisition indebtedness, so the debt falls under the rules that permit interest on up to $750,000 of such debt to be deducted. For debt secured by a first or second home and incurred before December 15, 2017, interest on up to $1 million can be deducted. The $750,000 cap applies to debt incurred after December 14.
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