Is HELOC interest deductible in 2018?

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sunny_socal
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Is HELOC interest deductible in 2018?

Post by sunny_socal » Fri Sep 21, 2018 10:47 am

Can we still deduct interest from a HELOC? Per this article it seems it is possible as long as it's used for a home purchase or improving the home:
https://www.marketwatch.com/story/yes-y ... 2018-04-30

From article:
Q: I took out a $500,000 first mortgage to buy my main home this year. Later, I took out a $250,000 home equity loan to pay for an addition to my main home. Can I deduct the interest on both loans?

A: Yes. You can treat both loans as acquisition debt the combined balance of which does not exceed the TCJA limit of $750,000. So you can treat the interest on both loans as deductible qualified residence interest.

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David Jay
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Re: Is HELOC interest deductible in 2018?

Post by David Jay » Fri Sep 21, 2018 1:21 pm

The controlling question on a HELOC is the use of the funds. They must have been used for the acquisition of your primary residence.
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kaudrey
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Re: Is HELOC interest deductible in 2018?

Post by kaudrey » Mon Sep 24, 2018 9:58 am

David Jay, that is NOT correct:

The Tax Cuts and Jobs Act of 2017 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.

Not just buying.

Spirit Rider
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Re: Is HELOC interest deductible in 2018?

Post by Spirit Rider » Mon Sep 24, 2018 2:00 pm

It also excludes amounts from cash-out refinancing not used to improve the property..

Thegame14
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Re: Is HELOC interest deductible in 2018?

Post by Thegame14 » Mon Sep 24, 2018 2:26 pm

only for the portion used to upgrade primary residence. so my HELOC used for a new roof and solar panels, is deductible, but if someone took a HELOC for a car, or college or a vacation, interest is NOT deductible...

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sunny_socal
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Re: Is HELOC interest deductible in 2018?

Post by sunny_socal » Mon Sep 24, 2018 2:51 pm

What about a HELOC taken out on Property #1, but spent on Property #2? (As a down payment and property improvements)

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Artsdoctor
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Re: Is HELOC interest deductible in 2018?

Post by Artsdoctor » Mon Sep 24, 2018 3:01 pm

sunny_socal wrote:
Mon Sep 24, 2018 2:51 pm
What about a HELOC taken out on Property #1, but spent on Property #2? (As a down payment and property improvements)
From the IRS website:

"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."

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eye.surgeon
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Re: Is HELOC interest deductible in 2018?

Post by eye.surgeon » Mon Sep 24, 2018 3:08 pm

I wonder what affect this is having on new HELOCs. I assume people will be much less interested in them now that they aren't interest-free piggy banks.
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David Jay
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Re: Is HELOC interest deductible in 2018?

Post by David Jay » Mon Sep 24, 2018 5:50 pm

kaudrey wrote:
Mon Sep 24, 2018 9:58 am
David Jay, that is NOT correct:

The Tax Cuts and Jobs Act of 2017 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.

Not just buying.
We are in agreement. I was actually quoting from another source. They used the word “acquire” to include substantial improvements, because you have acquired the value of the improvement.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

libralibra
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Re: Is HELOC interest deductible in 2018?

Post by libralibra » Mon Sep 24, 2018 7:53 pm

David Jay wrote:
Fri Sep 21, 2018 1:21 pm
The controlling question on a HELOC is the use of the funds. They must have been used for the acquisition of your primary residence.
David Jay wrote:
Mon Sep 24, 2018 5:50 pm
kaudrey wrote:
Mon Sep 24, 2018 9:58 am
David Jay, that is NOT correct:

The Tax Cuts and Jobs Act of 2017 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.

Not just buying.
We are in agreement. I was actually quoting from another source. They used the word “acquire” to include substantial improvements, because you have acquired the value of the improvement.
But also not just primary. I believe 2nd homes are ok too.

However if you hit the 750k limit, then it doesn't matter. I.e. if you already have a 750k loan on your first house, any new heloc or new 2nd house loan would not be deductible.

otoh new refi's are grandfathered - they get to keep the deduction up to the lesser of the old balance and old 1m limit.

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