IRS Clarifies Home Equity Loan Interest Deductibility

As a member of the National Association of REALTORS, I receive news about Real Estate. This article clarifies mortgage interest deduction on a home equity loan.

The Internal Revenue Service (IRS) has issued a news release(link is external) clarifying that in many cases, interest paid on home equity loans remains deductible under the new tax reform law.  Many questions have arisen on this issue, as many media reports on the new tax law indicated that as of 2018, interest is no longer deductible on home equity loans.  The IRS stated that “despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled.”  The key factor is that the proceeds of such loans must be used to buy, build, or substantially improve the taxpayer’s home that secures the loan.  Interest on a home equity or other loan used for personal living expenses (e.g. paying off credit card debt, education, or vacation expenses) would not be deductible.

Cut Thousands of Dollars of Mortgage Interest off Your Loan and Save Big!

1-introOkay, you have purchased your home and you are now making your monthly payment.  For the first few years of your loan, most of your payment is applied to interest and a smaller amount is applied to your loan balance.

You can save thousands of dollars in interest by making one extra mortgage payment every year and there is an easy, painless way to do just that.

Take your monthly principal and interest payment and multiply that number by 13.  Then divide that total by 12 to get your new monthly payment.  This will result in savings to you, reduce your principal mortgage balance faster and increase your ultimate net worth!

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