If you’ve built up a considerable amount of equity in your home, then you may have visions of using those funds to pay for upgrades, improvements, or even for adding more living space to your house. Before you do that, though, it’s important to have a good understanding of how President Trump’s new tax law may affect what you can and can’t deduct going forward.
For instance, in the new tax environment, the interest that is paid on a home equity loan may still be eligible to deduct – but only in certain cases. As an example, according to the new law, tax deductions for the interest paid on a home equity loan are suspended between this tax year (2018) and the year 2026.
There are, however, some exceptions to that rule. In this case, if the home equity loan is being used for the purpose of “buying, building, or substantially improving” the home that is securing that home equity loan, it may be deducted.
So, if you use a home equity loan for the purchase of new windows or a new roof, then the interest that you pay on that loan will still be deductible. If, however, you take out a home equity loan to pay off a higher-interest car loan or credit card debt, then you will not be allowed to deduct the interest.
If you’re leaning towards the purchase of a new home – one that better suits your current needs – give us a call. We can assist you in finding the ideal residence in the location of your choice. And, if you plan to put your present home on the market, we can get you started by providing you with a no-cost, no obligation valuation estimate.