Home Equity Loan
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Level 1

Home Equity Loan

In 2019 we used $9,050 to remodel/repair bedroom/bathroom.  Where is this entered?

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Level 15

Home Equity Loan

Enter under "deduction & Credits", "Mortgage interest...".

 

The IRS allows interest deductions on up to $750,000 or $1 million in mortgage borrowing, depending on when the loan originated and whether you’re filing with or separately from your spouse. That limit applies to the combined amount of all loans secured by a qualifying property — whether they are first (your primary mortgage) or second (home equity) mortgages.

 

For 2019, you can deduct the interest paid on home equity proceeds used only to “buy, build or substantially improve a taxpayer’s home that secures the loan,” the IRS says.

 

That rule went into effect for the 2018 tax year and was a big change from prior years, when you could deduct the interest regardless of what you used the money for.

 

For 2018 and 2019 many taxpayers that itemized in the past will find that they can no longer itemize because the standard deduction has doubled so all of their itemized deduction s no longer exceed the standard deduction.

Only if all itemized deductions exceed the standard deduction will it be of benefit.

Not all itemized deductions count the full amount. Medical expenses are reduced by 7.5% of AGI so if your AGI is $30,000, for example, then only medical expenses more than $2,250 would be an itemized deduction.

The 2018 tax law also caps the total of Sales tax OR State and local income tax, Property (real estate and personal property) taxes at $10,000.

Mortgage interest on loans after Dec 16, 2017 may be limited.

The Mortgage must be secured by the property to qualify.

Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan.

You can check the actual amount of itemized deductions by using the Search Topics for "itemized deductions, choosing" (under "My Account, Tools" in the online versions). Click on "Change my deduction". That will display the actual amount of itemized deductions vs. the standard deduction. (Be sure to uncheck "Change my deduction" after checking it so you do not lock in the wrong deduction.


2019 standard deductions

$12,200 Single
$18,350 Head of Household
$24,400 Married Jointly

Add an additional $1,300 for over age 65 or blind
This amount increases to $1,650 if the taxpayer is also unmarried.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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