Deductibility of Interest on Home Equity loan
HELOC Interest deduction – still available for HELOC’s taken out prior to 2018?
In your column in the SD Union on Dec 9th, you stated the below:
“…Another lost deduction: interest on home equity loans taken out in 2018 (but not on those taken out in prior years)…”
I am interested in the comment in the parenthesis. It was my understanding that this lost interest tax deduction was not impacted by the year the HELOC was taken out? I took one out years ago, did not use it in 2018 and would be very beneficial if I can deduct the interest from my 2018 taxes, and in future years.
Terry Says
You are correct and I am glad you pointed out the confusion I inadvertently may have caused. The IRS recently issued a clarification on this subject and here is a link to the IRS publication.:
https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law
badically, you can still deduct interest on a home equity loan taken out in any year —BUT ONLY IF THE MONEY IS USED TO IMPROVE YOUR HOME (Not to take a vacation, pay down credit card debt, etc.)
AND you can only deduct interest on $750,000 of “homeownership debt” That means if the combined amount of mortgage and home equity loan debt exceeds $750,000, interest in the amount in excess of that limit is not deductible.
it was my error in stating that only newly acquired debt fell under this restriction. ALL borrowings on home equity or to purchase a residence must now meet this test strting in 2018.
