How to Save Money: Home Equity Tax Deductions
Whether you use a home equity loan to pay your child’s college tuition or a home equity line of credit to continue upgrading your home to the house of your dreams, home equity has many advantages. And one of those benefits comes from tax deductions.
Is Interest on a Home Equity Loan Tax Deductible?
Yes, under the Tax Cuts and Jobs Act of 2017, interest paid on a home equity loan to
further improve, upgrade, or add on to the home is tax deductible. However, if the loan pays for personal living expenses such as tuition or credit card payments, the interest paid is not tax deductible. Below, we explore additional home improvement
projects that can provide tax deductions.
Home equity lines of credit: In addition to home equity loan interest, home equity lines of credit are also tax deductible. All qualifying expenses are tax deductible whether your home equity covers a loan, line of credit, or second mortgage.
Upgrades for medical purposes: Certain home improvements for medical purposes can be tax deductible, such as widening doorways, adding a ramp to an entryway, and lowering cabinets and counters. These expenses must exceed 7.5%
of your adjusted gross income and cannot add any value to the home.
Energy efficiency improvements: The world is becoming greener! Now, you can write off certain energy efficiency investments. This is called the residential energy efficient property credit. If you add solar, geothermal, or other green energy sources to your home, you may qualify for a tax deduction!
You work hard to increase the value of your home. Understanding your deductions on home equity loan interest can be challenging. See your tax advisor for assistance.
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