The tax reform bill that takes effect in 2018 contains significant provisions that impact nearly all of our clients. One such provision is that affecting the deductibility of home equity loan interest (second mortgages). In the past, interest paid on home equity loans has been fully deductible up to the first $100,000 of debt.
Under the new law, the interest will be deductible only to the extent that the loan proceeds are used to remodel or renovate the taxpayer’s primary residence. In other words, no deduction will be permitted if the loan is used to pay college tuition, purchase a car, pay credit card debt, or pay any other personal expense.