HELOCs and home equity loans will no longer be deductible.
Specifically, under Section 1302 of the TCJA, the mortgage interest deduction would only be permitted on the first $500,000 of mortgage debt (down from $1,000,000 today). In addition, only mortgage debt on an individual’s one primary residence would be considered (whereas under current law, interest on the mortgage debt on a second/vacation home may also be deducted). And only interest on “acquisition indebtedness” – debt borrowing to acquire, build, or substantially improve that primary residence – would be deductible, while so-called “home equity indebtedness” (mortgage debt used for any purpose besides acquiring, building, or substantially improving the primary residence) would no longer be deductible.
Many countries don’t even allow HELOC or cash out on refinance, so it’s not even something that can be done. The idea is people actually payoff their homes.
Most countries don’t allow deduction of mortgage interest or property taxes either, and they have higher income tax rates.
When I landed here, shocked that these can be deductible. Why USG use monetary policies to tackle long term and infrastructural issues baffle me. Monetary policies are for short term issues… correct me, economists Also, please drop the non-recourse too… home owners have to take personal responsibility of their purchases.
I’m always baffled when people feel the American middle class has it so bad in taxes. They have no clue what people in other countries pay. Those countries don’t have the wealthy 1% who are paying 35% of our tax bill. Our top 5% (over $179k) are paying a majority of income taxes collected. In other countries, their taxes are paid by the middle class who actually pay the rates you see. In the US, everyone pays a lower rate than their marginal rate.
This has actual effective rates by income level. The bottom half by income has 3.3% rate. The lower levels have a negative rate, since they get tax credits. Imagine telling those people they have to pay 28% income tax. Only the top 1% is paying that much. Everyone else would get a massive tax increase. That’s how you get “free healthcare”.
I want to read it, do you know where I can get a copy of that section?
My current mortgage on my primary residence is by refinancing, does it mean it is a “home equity indebtedness”? Could my existing loan grandfathered so that I could still deduct my interest in 2018 if the TCJA pass?
Also, please drop the non-recourse too… home owners have to take personal responsibility of their purchases.
