Is home equity loan interest tax deductible 2015

Is Interest on a HELOC Still Tax - Deductible ? Both loans are secured by the main home and the total does not exceed the cost of the home. Because the total amount of both loans does not exceed $7500 all of the interest paid on the loans is deductible. However, if the taxpayer used the home equity loan proceeds for personal expenses,.

In the past, you could deduct interest even if you used your HELOC or home equity loan for non-property-related expenses, such as buying other assets or consolidating debt. Now the deduction applies exclusively to expenses related to the house.

Not all home equity loan interest is deductible. To add to the confusion, there will also likely be cases when only a certain portion of the home equity loan is deductible. Snagging a tax deduction for the interest you pay is an added perk.

As with any other loan , however, take time to compare interest rates and loan terms from different lenders to find the best deal possible. So your HELOC is classified for tax purposes as home equity debt. Taxpayers used to be able to take a home equity loan or tap into a home equity line of credit, spend the money on whatever they wanted (pool, college tuition , boat, debt consolidation) and the interest on the loan was tax deductible. The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Maximum Refund Guaranteed.

If you take out a home equity loan , your interest payments may qualify for a deduction in addition to your mortgage interest.

Home equity loan interest. The deduction applies to interest paid on home equity loans , mortgages, mortgage refinancing, and home equity lines of credit. However, you got that deduction no matter how you used the loan – to pay off debts or to cover college costs, for example. On the other han interest on home equity money you borrow for non-renovation purposes is no longer tax deductible.

Another tax change HELOC borrowers should know about: The Tax Cuts and Jobs Act lowered the cap on the amount of home loan debt that qualifies for the interest deduction from $million to. However, the interest on HELOC money used for capital improvements to a home is still tax - deductible , as long as it falls within the home loan debt limit. Dates are important here, too.

Your equity is equal to the amount you could sell the home for minus the amount you still owe on the mortgage. The new tax law commonly referred to as the Tax Cuts and Jobs Act (TCJA) curtailed personal tax deductions for mortgage interest. While interest deductions on new borrowings are subject to a lower ceiling, interest on home equity loans is now disallowed altogether. However, a closer look is necessary to prevent taxpayers from being short-changed. If the borrowed money is not used for a qualified business transaction (such as purchasing rental property) then the interest is not a deductible business expense.

If you use your cash loan for something other than home improvement, it may still be deductible. Rental properties don’t qualify for the home equity interest write-off. Alternative minimum tax (AMT) exemption changes.

For example, if a homeowner uses an existing home equity loan or home equity line of credit or takes out a new one to pay student debt, buy a car or reduce credit card balances the interest isn’t deductible. The IRS calls this acquisition indebtedness. For example, you can deduct the interest if you use the proceeds to build an addition onto your home , renovate your kitchen, or replace your roof.

Unlike a home - equity loan , the rate for a home - equity line of credit changes based on an index. It often converts to a fixed rate after a set period of time. If you itemize, you might be able to fully deduct interest payments on either type of loan.

But if you use it to cover personal expenses, like credit card debt or student loans, you can’t deduct the interest. Since rental property is business property, the interest paid on the mortgage is a business expense, and fully deductible. However, this disallowance only applies to home equity indebtedness, which refers to debt secured by a primary residence that isn’t used to acquire the home.