Home Sweet Cash

No more boats? That’s right; boat purchases are currently not tax-deductible when using home equity.

Prior to last year’s tax overhaul, homeowners could deduct interest on up to $100,000 of home-equity debt used for any purpose. Now, unless the funds are obtained for certain types of home improvements, there is no tax deduction.  What to do?

Seek out a mortgage advisor:

• To schedule a review of existing mortgages;
• If you are in the process of a first time mortgage;
• If you are in the process of trying to figure out what to do about lost deductions;
• If you don’t have a mortgage advisor.

The new law puts many people in new territories. Much of the new law depends on whether you owned real estate before the law went into effect. The “grandfather” provision gives homeowners with debts of up to $1 million on two separate homes, more deductions, if the homes were owned prior to the new law being implemented.

Other new considerations come through homeowners having a mortgage plus an existing home equity loan; let’s say a $750,000 mortgage with an existing home equity of $200,000. If the loans were obtained before the law went into effect, both loans’ interest is deductible in most cases. For more scenarios, see IRS Release 2018-32.

If you are borrowing money on an existing home and want to utilize the loan money on the home, then there are still hoops to jump. The Internal Revenue Service doesn’t specifically state which monies from a home-equity loan are deductible; however, local sources suggest that the monies must be utilized to add value to a home.  Such an interpretation would mean that repairs to a home would not be deductible. See Publication 523, Selling Your Home from the IRS.

I typically advise people to make a list of wants and a list of needs. This helps us begin the navigational efforts required through the new law. One thing is for certain, you have a choice on who advises you.  It’s okay to get a second opinion about your loan options or any restructuring of loans you are considering.

We lend where we live,

Michael Pattullo
Peak Mortgage
Mortgage Advisor • MLO# 229675 • Peakmtgnw.com
360-607-9312

P.S. Readers – Thank you for continuing to email me at MPattullo@peakmtg.com, I appreciate it!