The Changes for 2018 Taxes
Two lost housing deductions pop off the new tax bill which you should know about, and I've also included one reminder of an unchanged deduction.
MOVING EXPENSES
They are no longer deductible if you are not active military. Before they were deductible if you moved over 50 miles for a job. There were more specific terms, however, now it is simple. You can't deduct the expense.
HOME EQUITY LINE
This product's interest has been deductible forever, but no more. This essentially kills the benefits of the piggy back loans (getting a first and second mortgage combination product), though they have decrease in popularity over the last five years.
Having that handy equity line available is still nice due to its low interest rate, but it is no better than a low interest credit card and potentially worse for you, since it is tied to real property. This makes it a much more secure bet for the lender and gives you no added benefit for allowing the lender to hold a piece of your property’s equity. You can't deduct the expense.
Here's more information: https://www.marketwatch.com/story/most-home-equity-loan-borrowers-dont-understand-how-trumps-tax-code-affects-them-2018-02-02
MORTGAGE INSURANCE
Having no deduction on the equity line make mortgage insurance more appetizing. Yes, I never thought I was say that either, but the legislature did not touch the mortgage insurance deduction.
So, you could go get a fixed rate second mortgage at 9% or so, or you could have the dream that the mortgage insurance is going to go away in a few years, and during the life of the mortgage insurance, it could be entirely tax deductible. Not a bad dream, sort of, until you get to the “however”. And here it is. However, it’s only tax deductible up to a point. If your adjusted gross income exceeds $109,000 or $54,500 if married and filing separately, the IRS prohibits you from deducting mortgage interest premiums.
Here is more information: https://investormint.com/tax/property-tax-deduction
WHAT ARE MY CHOICES IF I HAVE AN EQUITY LINE!?!?!?
1 -Bite the Bullet and Endure
Honestly, it might not matter. The “might” is the problem, so take the second choice.
2 - Review your debt allocation and consider whether a refinance will benefit you.
If you want to look into rolling the first and equity mortgage together, let’s take a look. Even if you need a bit of mortgage insurance for a time, it may still be beneficial due to the tax deduction. We can look at your gross adjusted income, how much you pay in interest with your current mortgage profile, and what is deductible currently vs. the future, then you can consult your tax advisor too.* Shoot me an email or text for a review.
*As you know, I am a mortgage broker, not a tax advisor.