Mortgage interest on purchase loans is still deductible under tax reform up to $750,000, but the deduction for interest on home equity loans becomes nondeductible once 2018 begins.
Unlike with purchase loans, there's no grandfathering provision for existing home equity loans, so for those for whom the deduction is important, looking at potentially repaying those loans sooner than expected might be worth considering.
If you have a mortgage or home equity loan that was not at all used for purchasing your home or remodeling your home, you will not be able to take a deduction in 2018 for any interest payments on this loan. As such, many people are paying off home equity lines of credit (HELOCs) before the end of the year. However, financial and legal expert Barry Sacks, Ph.D., J.D. warns that the “economic substance doctrine” could disallow the 2017 deduction if you “make an interest payment before year-end (thereby scoring a deduction that won't be available next year), and then borrow the same (or a similar) amount next year.” So, if you think you will need to borrow the same amount next year, it’s probably best to just leave things alone. But if you have the money and were just paying the loan down slowly because the interest rate was low, it could be a good time to pay it off.
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