Time to Escape From Your Home Equity Debt3 min read

The loss of this 2018 write-off may hurt for your refund for years. 

As of 01/01/2018 the Tax Cuts and Job Act has been enacted.

There are many changes taking place that will affect the way you report your taxes and the possible refund you will receive after filing your 2018 Personal Tax Return.

Some of the more common changes you will see are:

  • Reduction of the overall tax brackets 
  • Which bracket you will now fall into based on your adjusted gross income.
  • Standard deduction has nearly doubled for Single, Married Filing Jointly/Separately and Head of Household as well.

This will decrease your adjusted gross income and likely lead to a bigger return.

With this news of more savings from one end of the spectrum what’s happening that could be reducing the amount of refund you will be getting in 2018?

  • The question is, "Will HELOC interest be tax deductible in 2018?"

Interest paid on Home Equity Loans, aka Home Equity Lines of Credit, will no longer be deductible with the new tax law, with NO grandfathering in. Meaning if you already have a Home Equity Loan or Home Equity Line of Credit, 2017 is the last year you can write off the interest paid on the Home Equity Line of Credit (HELOC) until 2026.

See if you should refinance out of your HELOC today!

Continuing to wait while interest rates rise is a mistake may homeowners are going to make in 2018. Act now!

Historically speaking, Home Equity Line of Credit are one of the easiest and least expensive ways to borrow money.

In the past, consumers have used the equity in their home to get low, tax-deductible interest on large purchases, even if they weren't housing related.

For example, someone might use a Home Equity Line of Credit to purchase a new R.V. at a cost of $100,000.

By using the equity they’ve gained in their home through a HELOC the homeowner obtains a lower interest rate and they are able to deduct the interest paid for this R.V. from their gross income.

This has been seen as a, “loop-hole,” and through the new tax law has now been closed.

So, what can you do keep the interest from your Home Equity Loan as a tax write-off? You can consolidate your current First Mortgage and your Home Equity Line of Credit into a new combined First Home Mortgage through a Refinance.

How do you know?

Contact us today and we'll advise you if it is in your best interest to keep your HELOC or not. 

What about my current 1st mortgage?

The Tax Cuts and Job Act will still allow you to write off all of the interest from a First Mortgage up to $750,000.00. Example: You have a $300,000 First Mortgage you used to purchase your home.

Last year you needed some extra money for a child’s college tuition, so you accessed the built up equity in your home by opening a HELOC for $100,000. At the end of the year when you prepare your taxes you will only be able to write off the interest paid on the $300,000 First Mortgage.

Any interest paid to the Home Equity Line of Credit will just be another expenditure that you incurred over the year.

If you were to Refinance your First Mortgage and outstanding HELOC into a new combined First Mortgage of $400,000, you would then be able to write off all of the interest paid on the new $400,000 First Mortgage. Effectively giving you that tax write-off back. 

To see what can work for you, we would love to take a look at your current 1st & 2nd loan situation to see if there are any strategic options moving forward.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.
Glenn Groves

Mortgage Broker and Co-Owner of GTG Financial. USMC Veteran.

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