2018 Tax Changes Impact Home Equity Products
Even though new tax legislation no longer allows for home equity loans to be tax deductible, home equity products may still be a good choice.
According to financial research firm Raddon, recent changes to the U.S. tax code will affect homeowners in two ways:
1. Mortgage Interest Deductibility Limitations
Interest-deductible HELOCs and second mortgages (Home Equity Loans) are available to homeowners if they meet two conditions:
- The loan must be used to make substantial improvements to the home
- The combined total of the first mortgage balance and HELOC or second mortgage can not exceed the new $750,000 limit on mortgage amounts qualified for interest deduction
2. Elimination of Tax Deductibility
Previously, interest paid on home equity products was deductible up to $100,000 and consumers regularly used home equity products to gain a tax advantage when purchasing boats, recreational vehicles, autos, tuition, and other needs. The new law eliminates the tax deductibility for interest paid on home equity loans and HELOCs. There will be no grandfathering for existing home equity loans.
The impact of these changes will be offset for some consumers as the standard deduction will be nearly doubled to $24,000 for married couples filing jointly.
Home equity products are still valuable to consumers. Even without the deduction, home equity loan financing rates are still lower than personal loans and credit cards.
At U.S. Eagle, our home equity loan and HELOC have low rates and no up-front costs. Even with the new tax changes, these home equity loans provide an excellent way to finance home improvements that lead to increased home value. If you have equity in your house, a home equity loan could be the best option for you.