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Tag Archive for Home Equity Loans

IRS Clarifies Interest On Home Equity Loans Can Still Be Deductible

Lisa Nason, Interest On Home Equity Loans

In an Information Release, IRS has announced that in many cases, taxpayers can continue to deduct interest paid on home equity loans under the recently enacted Tax Cuts and Jobs Act.

Taxpayers may deduct interest on mortgage debt that is “acquisition debt.” Acquisition debt means debt that is: (1) secured by the taxpayer’s principal home and/or a second home, and (2) incurred in acquiring, constructing, or substantially improving the home. This rule hasn’t been changed by the Tax Cuts and Jobs Act.

Under pre-Tax Cuts and Jobs Act law, the maximum amount that was treated as acquisition debt for the purpose of deducting interest was $1 million ($500,000 for marrieds filing separately). Under the Tax Cuts and Jobs Act, for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the limit on acquisition debt is reduced to $750,000 ($375,000 for a married taxpayer filing separately).

Under the Tax Cuts and Jobs Act, for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, there is no longer a deduction for interest on “home equity debt.” The elimination of the deduction for interest on home equity debt applies regardless of when the home equity debt was incurred.

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IRS Clarifies Interest On Home Equity Loans Can Still Be Deductible

In an Information Release, IRS has announced that in many cases, taxpayers can continue to deduct interest paid on home equity loans under the recently enacted Tax Cuts and Jobs Act.

Taxpayers may deduct interest on mortgage debt that is “acquisition debt.” Acquisition debt means debt that is: (1) secured by the taxpayer’s principal home and/or a second home, and (2) incurred in acquiring, constructing, or substantially improving the home. This rule hasn’t been changed by the Tax Cuts and Jobs Act.

Under pre-Tax Cuts and Jobs Act law, the maximum amount that was treated as acquisition debt for the purpose of deducting interest was $1 million ($500,000 for marrieds filing separately). Under the Tax Cuts and Jobs Act, for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, the limit on acquisition debt is reduced to $750,000 ($375,000 for a married taxpayer filing separately).

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Interest On Home Equity Loans Often Still Deductible Under New Law

WASHINGTON – The Internal Revenue Service today advised taxpayers that in many cases they can continue to deduct interest paid on home equity loans.

Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 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 taxpayer’s home that secures the loan. Read more