HELOC on a home purchased before 2017

Forum|Forum|3 years ago
January 30, 2023
3 replies
18 views

I purchased a house in 2017, the remaining mortgage principal as of January 2022 was $800,000.

In 2022, I took a $200,000 loan (HELOC) and used it to improve my home.

Is the mortgage interest on my second loan ($200k) tax deductible?

Vanessa A

Alumni - Intuit

No, the HELOC you took out would not be grandfathered in because it was taken out after 2017. The interest on your HELOC would not be deductible because your total would be over $750,000.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

MikePiv

Level 2

Here's a link to a 2019 Congressional Report that provides nine detailed scenarios for deducting mortgage interest. https://crsreports.congress.gov/product/pdf/IF/IF11111/6

Example 8, repeated below, is relevant for your scenario.

Example 8

Mortgage Origination date: February 2015.

Current mortgage balance: $800,000

Home equity loan Origination date: November 2018

Home equity loan balance: $90,000

Used for: Home remodel

The couple would be allowed to deduct all mortgage interest paid because they are below the applicable loan limit ($1 million) for mortgages originated before December 16, 2017. They would not be allowed to deduct the interest paid on the home equity loan because debt incurred before December 16, 2017, counts toward the $750,000 limit for debt incurred on or after December 16, 2017.

KrisD15

Alumni - Intuit

In your situation , as Vanessa A points out, since the original mortgage was taken out before the change in mortgage loan limits was in effect, the entire amount is deductible.

Because the additional loan went over the limit that was in place for that Tax Year, the interest, although used to improve the home, would be disallowed.

@5165202

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"