Homeowners wondering if they can still take a home equity loan tax deduction will be glad to find out it is still very possible even with the recent changes brought on by President Trump’s Tax Cuts and Jobs Act (TCJA). But the new changes come with new rules and even more limitations. To provide a clear understanding of the new rules, American Tax Service, a tax blog dedicated to helping Americans easily file their taxes has just published a new post revealing the new limitations and if it is a right move to deduct Interest on a home equity loan.
With the new law, taxpayers can deduct interest related to their mortgage up to a limit of $750,000 on qualified loans for married couples who decide to file jointly and $375,000 for individual filers for homes purchased after December 15th, 2017. The law will stand till the 2025 tax season, it takes full effect in the 2019 year and will apply to interest paid on home equity loans, mortgages, mortgage refinancing, and home equity lines of credit.
One limitation homeowners will have to consider with the new law is that deductions can only be made on loans used to purchase a home, build a new home, or perform major renovations to an existing home. Non-property expenses such as debt consolidation or cosmetic renovations like painting the outside of the house are no longer allowed. Taxpayers will also need to keep receipts and records for everything they spend should in case they get audited.
The tax blog also revealed that for many cases, standard deductions will provide a larger tax deduction than itemizing things like home equity loan interest. This is because the standard deduction has changed to $12,000 for single filers, $24,000 for married couples filing jointly, and $18,000 for heads of household. Another influencing factor is the exemptions set out for the Alternative Minimum Tax (AMT).
To deduct the home equity interest, taxpayers will need to file Form 1098 by the last day of January. The form will be supplied by the lender and will indicate how interest has been paid in the last year. Filing taxes can be complicated and a little confusing if trying it out on your own and there is a good chance you will miss out on a lot of deductions. For this reason, American Tax Service recommends that you consider using the H&R Block online tax preparation. With the help of H&R Block online tax filing, you’ll be able to take a lot of the stress and hassle out of filing your taxes and get a bigger tax refund.
For more information about the equity loan tax deductions, please visit, https://americantaxservice.org/home-equity-loan-tax-deduction/
About Frank Ellis
Frank Ellis is a Traverse City Tax Preparation Planner and published author. He has written tax and finance related articles for eight years and has published over 900 articles on leading financial websites.
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