David Kirst, CPA

Home Equity Loan - Tax Law Changes - Shared article from CPA Practice Advisor Tax Correspondent On Apr 3, 2018 Reports of the demise of the mortgage interest deduction for home equity loans are greatly exaggerated.... Under the new Tax Cuts and Jobs Act (TCJA), the deduction for mortgage interest paid on acquisition debt is modified, while write-offs for interest paid on home equity debt are eliminated. But taxpayers can still squeeze through a loophole for certain home equity loans if the proceeds are used for home improvements. Initially, the validity of this technique was up for debate, but the IRS has approved the technique (IR-2018-32, 2/21/18). For starters, you can only deduct mortgage interest on a loan secured by a qualified residence. This can be your primary residence or one other home such as a vacation home. Assuming you meet these requirements, the tax treatment depends on whether the loan is characterized as an acquisition debt or a home equity debt. An acquisition debt is a debt incurred to buy, build or substantially improve a qualified residence. Prior to the TCJA, you could deduct mortgage interest paid on up to $1 million of acquisition debt. Any other qualified debt, including most home equity loans and lines of credit, is considered to be a home equity debt. Under prior law, the deduction was limited to interest paid on the first $100,000 of home equity debt, regardless of how the proceeds were used. But now the TCJA complicates matters. For loans made after December 15, 2017, the deduction threshold for acquisition debt is lowered from $1 million to $750,000. But interest deductions for prior loans are grandfathered under the new law, even if you refinance your remaining mortgage debt. Even worse, the TCJA completely wipes out the deduction for interest paid on home equity debt, beginning in 2018. For instance, no deduction is allowed for home equity debt used to pay off credit card charges or a new car. As with many other new tax provisions for individuals, these changes are currently scheduled to sunset after 2025.

As the end of the year approaches, how well do you know your personal tax landscape? From income changes to changes in family size; from growth in capital gains to the potential impact of alternative minimum tax; from the annual hunt for additional tax deductions and the proverbial shoebox of unorganized receipts, how well you are prepared can directly impact how well you are able to engage in smart year end tax planning. With three months left in tax year 2016.... Spend some time looking over your "tax landscape" with a trusted tax advisor.

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**Important September 15, 2016 Calendar Events - Tax Due Dates Individuals - Make a payment of your 2016 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2016. Corporations - File a 2015 calendar year income tax return (Form 1120 or 1120-A) and pay any tax due. This due date applies only if you made a timely request for an aut...omatic 6-month extension. S corporations - File a 2015 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1. Partnerships - File a 2015 calendar year income tax return (Form 1065). This due date applies only if you were given an additional 5-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1. Corporations - Deposit the third installment of estimated income tax for 2016. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.