The tax-deduction rules for rental homes are completely different than the rules for your own home. You can usually deduct the interest on a home equity line of credit taken against a rental home, relative to that rental home’s income. However, calculating how that deduction affects your overall taxes can be more.
Tax deductions for home mortgage interest under the Tax Cuts and Jobs Act of 2017, including changes in the deductibility of acquisition and home equity indebtedness.
If you are looking to take a mortgage or home equity loan, you need to know how the tax changes may impact you.
Mortgage interest can only be deducted if you are in the 30% of taxpayers who itemize their taxes. Of all the people who itemize, three out of four claimed a deduction for mortgage interest on their home, according to 2016 data. Approximately 21% of all tax filers have claimed this important tax deduction before.
The 2017 Tax Cuts and Jobs Act introduced a slew of new tax breaks while doing away with others, one of which was supposed to be home equity loan interest. Much of that deduction has effectively been.
Taxpayers used to be able to take a home equity loan or tap into a home equity line of credit, spend the money on whatever they wanted (pool, college tuition, boat, debt consolidation) and the interest on the loan was tax deductible. For borrowers in higher tax brackets this was a huge advantage.
The advisory specified that interest on home equity loans, home equity lines of credit (HELOCs) and second mortgages is still deductible,
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Another tax change HELOC borrowers should know about: The Tax Cuts and Jobs Act lowered the cap on the amount of home loan debt that qualifies for the interest deduction from $1 million to $750,000.
The IRS has clarified the deduction of interest on HELOCs and home equity loans under the Tax Cuts and Jobs Act.
The limit on deductible interest for your mortgage is now $750,000 of indebtedness for tax years 2018 through 2025. However, if your loan originated before December, 15, 2017, you will still be able to deduct the interest on up to $1 million of indebtedness.