Everyone likes the thought of fixing up their home, but that enthusiasm starts to wane as the associated price tag goes up. Luckily, there are loans available to make sprucing up your home more affordable. Better still, you may be able to get a tax break on the loan based on certain conditions. Homeowners who take out home equity mortgages in Las Vegas may be able to deduct the interest associated with renovations from their taxes.
Who can Deduct Interest on a Home Equity Loan?
It is important to keep in mind that deductions may or may not be available for your home equity loan. Factors that influence your ability to deduct interest on a loan include:
- When you got the loan
- How much money was borrowed
- What the funds were used for
Tax Cuts and Jobs Act of 2017
The Tax Cuts and Jobs Act of 2017 was instrumental in providing interest deductions. The Act permits a total deduction up to $750,000 for joint filers who took out a loan after December 15, 2017. Those who choose to file separately can deduct interest in taxes up to $375,000. In order to qualify for these deductions, funds must be used for home improvements in specific ways. The funds must be used for buying, building, or substantially improving your home.
Limitations on Tax Deductions
In order to qualify for tax deductions on the interest payments for your mortgages or reverse mortgages in Las Vegas, certain conditions must be met. For starters, the improvements must also be made only to the home that was used for securing the loan in the first place. For instance, you cannot take out a loan and use some of the funds for the original home while fixing up a second home or a vacation house at the same time. Additionally, there are limitations on mortgage loans that are still outstanding. For instance, if you have an existing mortgage balance of $500,000, you will only be able to deduct taxes for interest paid on up to $250,000 of the mortgages in Las Vegas.
Time is another consideration when determining tax breaks for interest paid on home improvements. If your home equity loan started before December 15, 2017, the limits are higher for joint and separate filers, providing that the money was used to build, buy, or improve the house.