Future of HELOC Loans

[Snaggletooth]

I understand that interest on HELOC loans is going to be severely impacted by the new tax law.

Will the restrictions apply to business loans as well as Schedule A loans on one's residence?

[ATSMAN]

I understand that interest on HELOC loans is going to be severely impacted by the new tax law.

Will the restrictions apply to business loans as well as Schedule A loans on one's residence?

It is my understanding that if the proceeds of a HELOC is used for anything other than "acquisition indebtness" which includes improvements to the underlying property it is not deductible.

[Kram BergGold]

Atsman is Incorrect

Home equity interest will be deductible if the debt is for substantial home improvements and basically anything other kind of interest which has a place on the return to be deducted such as business, rental, investment. or student loan (the loan must be 100% to cover qualified education expense).

[TAX4US]

So is interest on a HELOC used to purchase a 2nd home(not used for rental) considered ded as investment interest provided there is enough INCOME AVAILABLE?

[Rapid Robert]

So is interest on a HELOC used to purchase a 2nd home(not used for rental) considered ded as investment interest provided there is enough INCOME AVAILABLE?

Can you give a scenario where a second home not used for rental would be investment use, rather than personal use?

Also, acquisition debt still applies to a second home, as long as the loan is secured by the property within a short period of time after acquisition. But there is some vagueness in the law about "a qualified residence", does it mean the loan has to be secured by the actual 2nd property, or is being secured by the primary home (a qualified residence) sufficient?

[Rapid Robert]

I understand that interest on HELOC loans is going to be severely impacted by the new tax law.

What is impacted is HOME MORTGAGE interest deduction on home equity debt, not HELOCs per se. All we know about a HELOC is that it is secured by the residence, nothing more without historical facts from the taxpayer about what proceeds were used for. Whether the interest is deductible or not as home mortgage interest depends on those facts. Whether the interest is deductible or not as some other kind of interest hasn't changed much, but the 10T election may come into play, it's not clear yet. Large businesses have a new limit on deductible interest, but I don't think there were any changes for deductible interest for smaller businesses.