Do HELOC loans make sense after new Tax reform?

Question

Due to the new restrictions on HELOC loans of not being able to deduct the interest paid, do they make sense to open?

Nicholas Aiola · Answer

@Ernesto Correa

@Jason Gines is right - the deductibility of the interest follows the use of the money. In terms of using the HELOC funds to invest in a rental property, the interest would still be deductible under the new law.

Basit Siddiqi · Answer

@Ernesto CorreaIt appears that HELOC's interest rate is hovering around 6%.This interest rate seems very attractive to most alternatives.Regarding the deduction for tax purposes - Previously, you were able to take out a HELOC and the interest expense was deductible aslong as you itemized your deduction. Now, the interest deduction depends on what you use the money for.Take HELOC and use it for personal purposes - nondeductibleTake HELOC and use it for rental property - deductible under schedule ETake HELOC and use it for purchase of stocks - deductible under schedule A as long as you have investment income.

Ned Carey · Answer

@Ernesto Correa Even if the interest in not deductible it is still probably some of the cheapest money you can get. I concur that if the money is used for a business purpose it is deductible but you should have a very clear trail of where the money went.

Ernesto Correa · Answer

@Nicholas Aiola

Thank you

Jason G. · Answer

I'm under the impression that if you use the HELOC to purchase investment properties then it should still be deductible.

Ernesto Correa · Answer

@Basit Siddiqi

Thank you for the info. I have been looking into what would make more sense in regards to refinancing/HELOC my house since I have a bit of equity.

Another question..... Can the bank take away the HELOC if house prices were to fall? Would they request for it to be payed off ASAP?

Thank you.

Ernesto Correa · Answer

That would be awesome if it's still possible...

Do HELOC loans make sense after new Tax reform?

Do HELOC loans make sense after new Tax reform?

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