Wondering what to do about your home equity loan with the new tax law change?
Some home equity loan interest deductions on federal tax returns are now a thing of the past. But Academy Mortgage offers a solution that may still provide a tax benefit.
Under the new tax law, effective January 1, 2018, homeowners are no longer allowed to deduct from their federal tax return* the interest on a home equity loan or line of credit used for personal living expenses (like consolidating debt, paying college tuition, buying a new car or boat, etc.). This deduction was previously allowed up to $100,000. There is no grandfather clause, meaning many homeowners with an existing home equity loan or line of credit have lost this benefit.
There is a solution to regain this tax benefit.
If you are a homeowner with a home equity loan or line of credit used for personal living expenses, you may consider refinancing your loan into a new first mortgage. Under the new tax law, homeowners can still deduct the interest on mortgages worth up to $750,000.
If you are exploring a new home equity loan or line of credit to cover personal living expenses in the near future, a cash-out refinance may be a better option to retain the mortgage interest deduction.
* Interest on home equity loans or lines of credit used to buy, build, or substantially improve the taxpayer's home that secures the loan may still be deductible. Consult your tax professional about your specific situation and the tax savings benefits of homeownership. Note: Academy Mortgage does not provide home equity loans.