IRS clarifies interest on home equity loans may still be deductible

Based on Internal Revenue Service IR 2018-32 released February 21, 2018, taxpayers may still be able to deduct interest paid on home equity loans in 2018 (and beyond).

Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers may still be able to deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled.  The IRS clarified that the Tax Cuts and Jobs Act suspends 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.

If you have questions about the deductibility of your home mortgage interest in 2018, check with us.