Home Equity Interest Changes in the Tax Cuts and Jobs Act

May 15, 2018

The tax law that was passed in late December, the Tax Cuts and Jobs Act, made some significant changes to the way that home equity loans figure into your taxes.  You’ve always been able to deduct your home mortgage interest (within certain limits), but you’ve also been able to deduct the interest on any loan that is secured by your home.

Now there’s a caveat to that last point: it depends on how the money is used.  If you take out a home loan and you spend the money either improving or expanding your home, the interest is still deductible. If you use the money for personal expenses, like paying credit card debt, then the interest paid is not deductible.

There’s some additional information directly from the IRS here, and if you have any specific questions about your situation, please feel free to contact us.

Update: If you’re looking more information but the IRS page is a little too dry for you, check out this explanation of the changes on lendedu.com. They review the changes and provide a few examples.