Author Topic: Is HELOC interest deductible in 2018 or not?  (Read 307 times)

BayAreaFrugal

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Is HELOC interest deductible in 2018 or not?
« on: February 06, 2018, 12:41:38 PM »
I've seen conflicting things. Some sites tell me that under no circumstances is HELOC interest deductible in 2018, but other sites tell me that if the money is used to substantially improve your residence it is still deductible. Does anyone know for sure what the tax law says? I need to decide if I want to accelerate my HELOC payments or not.

Wile E. Coyote

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Re: Is HELOC interest deductible in 2018 or not?
« Reply #1 on: February 06, 2018, 12:58:41 PM »
For tax years ending after beginning after December 31, 2017, home equity indebtedness is no longer considered "qualified residence interest" regardless of what the proceeds were used for.  Such interest could still be deductible to the extent that it qualifies for another exception from the definition of "personal interest," which would include things like interest paid or accrued on indebtedness properly allocable to a trade or business and investment interest.

SeattleCPA

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Re: Is HELOC interest deductible in 2018 or not?
« Reply #2 on: February 06, 2018, 05:08:52 PM »
I actually think a HELOC could be acquisition indebtedness which would mean the interest would be deductible if money was used to buy or substantially improve a residence or used to refinance acquisition indebtedness AND the HELOC was a mortgage (so secured/collaterilized by an interest in the property).

This article is based on old law, but I think the logic works for the new law:

https://www.fulleredu.com/taxblog/mortgage-interest-deduction-acquisition-indebtedness-v-home-equity-indebtedness/

BTW, I've tried to pretty carefully read both the statute and the conference report on the mortgage interest deduction so I can blog about changes in a few weeks.
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Wile E. Coyote

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Re: Is HELOC interest deductible in 2018 or not?
« Reply #3 on: February 10, 2018, 09:35:40 AM »
I actually think a HELOC could be acquisition indebtedness which would mean the interest would be deductible if money was used to buy or substantially improve a residence or used to refinance acquisition indebtedness AND the HELOC was a mortgage (so secured/collaterilized by an interest in the property).

This article is based on old law, but I think the logic works for the new law:

https://www.fulleredu.com/taxblog/mortgage-interest-deduction-acquisition-indebtedness-v-home-equity-indebtedness/

BTW, I've tried to pretty carefully read both the statute and the conference report on the mortgage interest deduction so I can blog about changes in a few weeks.

Yes, I think you are correct.  You should be sure to track the use of funds and apply the interest tracing rules if the HELOC is used for more than just substantial home improvements.
« Last Edit: February 10, 2018, 09:46:10 AM by Wile E. Coyote »