Tax Breaks

How Can I Deduct Home-Equity Interest Under the New Tax Law?

Still want to tap your home equity and deduct the interest? Options remain.

Note: The editors of Kiplinger's Personal Finance magazine and the Kiplinger Tax Letter are answering questions about the new tax law from subscribers to our free Kiplinger Today daily email. See other reader Q&As about the new tax law, or submit your own question.

Question: I understand that the new tax law eliminates the deduction of interest on home-equity loans. But, will there be an exception if the loan is used to improve a home, such as remodeling or building an addition?

Answer: Yes. As in the past, home-equity loan proceeds used to substantially improve a home are considered acquisition indebtedness, so the debt falls under the rules that permit interest on up to $750,000 of such debt to be deducted. For debt secured by a first or second home and incurred before December 15, 2017, interest on up to $1 million can be deducted. The $750,000 cap applies to debt incurred after December 14.

Under the old law, interest on home-equity debt that did not qualify as acquisition indebtedness (because it was used for purposes other than to buy, build or improve a first or second home) could be deducted. That’s the write-off Congress abolished, starting in 2018, for both new and old loans.

Most Popular

Refunds for $10,200 Unemployment Tax Break to Begin This Month
Coronavirus and Your Money

Refunds for $10,200 Unemployment Tax Break to Begin This Month

The IRS will start issuing automatic refunds sometime in May to people eligible for the unemployment benefit tax exemption.
May 1, 2021
Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs
Coronavirus and Your Money

Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs

People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021…
May 4, 2021
10 Dividend Growth Stocks You Can Count On
dividend stocks

10 Dividend Growth Stocks You Can Count On

What should investors prioritize in dividend growth stocks? A history of aggressive payout expansion, and the ability to generate enough cash to keep …
May 3, 2021

Recommended

Home Upgrades that Pay Off
Smart Buying

Home Upgrades that Pay Off

Some affordable renovations recoup most of their cost when you sell.
April 24, 2021
PPP Loan Basics for Small Business Owners
Coronavirus and Your Money

PPP Loan Basics for Small Business Owners

Although uncertainty and confusion have surrounded the Paycheck Protection Program since its launch, that shouldn't stop small business owners from pa…
March 30, 2021
Smart Ways to Cut Your Utility Bills
Tax Breaks

Smart Ways to Cut Your Utility Bills

Tax breaks and potentially lower home energy costs make these green projects worth a look.
February 24, 2021
Biden Steers PPP Loans to Smallest Businesses
Coronavirus and Your Money

Biden Steers PPP Loans to Smallest Businesses

For two weeks, mom-and-pop businesses will move to the front of the line for Paycheck Protection Program loans.
February 22, 2021