The language of the new tax law led some to believe that
interest on all home equity loans, home equity lines of credit and
second mortgages was not deductible from 2018 through 2025. In
response, the IRS issued a statement clarifying that the interest
will remain deductible based on how the proceeds were used and not
how the loan is labeled.
Previous Provisions
Under prior tax law, taxpayers could deduct qualified residence
interest on a loan of up to $1 million secured by a qualified
residence, plus interest on a home equity loan (other than debt
used to acquire a home) up to $100,000.
For tax purposes, a qualified residence is the taxpayer's
principal residence and a second residence, which can be a house,
condominium, cooperative, mobile home, house trailer or boat. The
principal residence is where the taxpayer resides most of the time,
and the second residence is any other residence the taxpayer owns
and treats as a second home.
