As you might imagine, the Tax Cuts and Jobs Act of 2017 created a bit of confusion around the tax-deductibility of mortgage interest in general and home equity lines of credit (HELOC's) in particular. This month’s blog is intended to explain how the Equity Debt Interest Tax changes made by the GOP’s Tax Cuts & Jobs Act, passed late in December 2017, might affect you and your family in 2018 and future years, if you currently have a HELOC on your home, or are considering one in 2019.
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. Under this new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. Borrowers who opened Home Equity Lines of Credit used for debt consolidation will no longer be allowed to write off the interest on their 1098 forms at tax time. However, if you opened a HELOC for home improvement or home purchase, you may still be able to deduct the interest.
Debt consolidation refinances or cash out for any reason, if done as a new 1st lien mortgage against a primary or second home residence, still qualifies in full for the mortgage interest tax deduction going forward. Consolidating a 1st & 2nd mortgage into a new 1st lien mortgage will also allow borrowers to continue taking advantage of the mortgage interest deduction allowance. Now with conforming loan limits moving higher in 2019 across the country, refinancing to a new low rate has become even easier.
Please let us know if you would like to discuss a year-end review of your mortgage options for the new year. We have seen an unexpected dip in interest rates since early December, and this is shaping up to be a perfect time to lock in a 30-year fixed rate, before they possibly move higher once again in the new year. As brokers, we have the absolute best rates available, with no lender fees and the superior service e you have come to know from us.