Refinance Mortgages, HELOCS and Taxes

Once upon a time, if you used your home as collateral to borrow money, you could almost always count on claiming the interest expense as a deduction on your income taxes. These days, your ability to claim interest deductions will depend on how you use the money and how much you borrow.* Let’s take a look.

What can you claim? 

To be eligible for an interest deduction, the proceeds of your home loan must be used to construct, purchase or substantially improve a qualified residence. This is considered “acquisition debt.”

Borrowers often use home equity lines of credit (HELOCs) to finance expenses unrelated to their homes, such as vacations or college educations. HELOCs are still available for these types of expenditures, yet some of the tax advantages have been removed.

How much can you claim?

You can claim interest expenses on acquisition debt of up to $750,000 for a home financed after December 15, 2017. This means if you itemize expenses on your taxes, you can deduct the interest expense you pay on up to $750,000 of home-related loans. If you have more than one loan—a primary mortgage and a qualified HELOC, for example—you can deduct interest expense on up to $750,000 of the combined loan amounts.

Borrowers can deduct interest expense on up to $1 million of acquisition debt incurred on or before December 15, 2017. When debt is refinanced, it is treated as having been incurred on the original date, and interest paid on up to $1 million of the refinanced loan may still be deducted.

If you have questions about how the tax changes will affect your particular situation, we encourage you to consult your tax advisor.

And remember, your home mortgage remains an important instrument in your financial toolbox, even with tax changes.

*Always consult your tax professional for advice specific to your situation.

 

 

Karen Jones is a Licensed Mortgage Loan Officer (NMLS 307015) located in Phoenix and serving Arizona families with their home lending needs. As a Banker of over 32 years, Karen is dedicated in ensuring that her clients are well educated and prepared for their new home purchase.  Learn more about our 100% Financing programs and obtain your Underwriting Credit Approval before you start shopping. Let a home loan specialist guide you by contacting Home Loan Officer, Karen Jones from AmeriFirst Financial, Inc. located in Phoenix, Arizona.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Karen Jones does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Karen Jones will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

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