When the new tax bill was passed, it was widely accepted that the interest deduction on mortgage would be capped at a maximum of $750,000 of mortgage debt. And, that interest on home equity loans would not be deductible at all. However, recently the IRS issued a news release clarifying the new rules regarding home equity loan interest deduction.
Click HERE to read the IRS news release.
The IRS indicated that homeowners can in fact continue to deduct the interest on home equity loans, provided that the loan is used to “buy, build or substantially improve the taxpayer’s home that secures the loan.” This is great news for those who want to use a home equity loan to renovate their home. Not great news if you were planning on using the equity to pay of a credit card, or use for other non-home improvement purposes.