New Tax Laws and your Home Equity Loan or Credit Line

New Tax Laws and your Home Equity Loan or Credit Line

The 2018 Tax Cuts and Jobs Act limits the deduction for home equity loans and home equity credit lines. The media has done a poor job of informing the public about this issue. Many of the newspaper and radio accounts have indicated there is no provision for deducting interest paid on equity loans and credit lines beginning in 2018. This is not accurate.

If the proceeds of the debt can be traced and proven to be used for the purchase, construction or improvement of a taxpayer’s principal residence or second home, the interest on the debt will still be deductible. You must save your receipts and they must clearly indicate the property address. You cannot pay yourself for any labor out of this debt. The debt must also be secured by your main home or a second home.

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