Purchasing a second home
- cash from a home equity line of credit because you will not be able to add that second home as a deduction
- Do – purchase a second home with a separate mortgage because when combined you can write off mortgage interest up to $750,000
Taking out a home equity line of credit
- Don’t – use that money to purchase a boat, car, pay for your kid’s college, etc. because that interest will not be a deduction
- Do – use that money to improve the home because that will qualify as a mortgage interest deduction on your 2018 taxes up to $750,000
Purchasing a rental property
Purchasing a rental property is a little different in the fact that you could take an equity position on your home to invest in a rental property, but that interest would be a deduction on the rental schedule and not apply to the principal mortgage interest deduction.
If you have questions, we encourage you to speak with your accounting professional. You’re also welcome to give Judy a call and she can connect you with Paul if you need help answering any additional questions.