For many home owners – and particularly those who have a fair amount of equity in their property – securing a home equity loan or line of credit can provide a great way to tap into funds for making improvements to the property, paying off higher-interest debt, or just about any other financial need. And, as an extra added bonus, the interest on these loans, for the most part, has been deductible. But now, given the new tax laws that were recently passed by Congress last December, this could all change – and because of that, some home owners may no longer be able to take these interest deductions.
Based on the wording of the new tax rules, interest-deductible home equity lines of credit and second mortgages would still be available to home owners – provided that these vehicles meet two key criteria. These include the following:
- The proceeds are used for making “substantial improvements” to the property, and
- The combined total of the home owner’s first mortgage balance and their second mortgage or home equity line of credit does not exceed $750,000.
With that in mind, if you are thinking of moving forward with a home equity loan or line of credit, and you still wish to be able to deduct the interest, be sure that you pay close attention to how you use the funds, as well as the total amount of mortgage balance that you will have, as it could make a big difference.
In some cases, obtaining such a loan or line of credit could make a lot of sense – especially if you plan to make updates to your home with the intent of selling it. If you’re considering making a move in the near future, Contact Us. We can help you with suggestions for getting your home ready so that it shows beautifully to potential purchasers. We will also provide you with a free, no obligation analysis regarding your current home’s valuation.