2019 is a big year for tax professionals. After a long period of legislative near-stasis, the changes wrought by the Tax Cuts and Jobs Act of 2017 have prompted a level of client interest and engagement not seen for quite some time. This year it seems that everyone, quite naturally, has questions about how the new laws will affect their income tax bill and among the most common questions we’ve seen here at Brighton Jones is this:

There are three main questions that will determine whether the interest paid on additional mortgages superior site for international students (whether home equity second mortgages or mortgages on a second home) is deductible, and we’ll walk through these below.

1. What is the money from the loan used for?

Starting in tax year 2018 (returns due ), only interest paid on “acquisition indebtedness” may be deducted. This means that interest is only deductible if the loan was used either to acquire, build, or “substantially improve” a main or second home. For example, interest on a home equity loan used to update your kitchen with the latest industrial countertops and internet-enabled appliances will still be deductible. Interest on a home equity loan used to realize your dream of owning a classic air-cooled Porsche 911, however, will no longer be deductible.

This restriction applies regardless of when the loan originated-nothing is grandfathered. Therefore, interest you were able to deduct on your 2017 return return. If you have a home equity mortgage, you should discuss this issue with your tax preparer to ensure that they are aware of how you have used the funds from your home equity mortgage.

Note that the acquisition indebtedness must apply to the home that is used to secure the mortgage. For example, interest on a mortgage used to purchase a second home that is secured by the second home is deductible but interest on a home equity loan used to purchase a second home that is secured by the taxpayer’s main home is not deductible. This is a relatively rare scenario, but if it applies to you, you should discuss it in more depth with your tax planning professional. Read more