What the New Tax Law Means for the Home Equity Loan Interest Deduction

Tax and Financial News May 2018

What the New Tax Law Means for the Home Equity Loan Interest Deduction

Prior to the recent tax law changes, taxpayers were allowed to deduct qualifying mortgage interest on loans up to $1 million, plus the interest on an additional $100,000 in home equity debt. The new tax law clearly limits the mortgage interest deduction to $750,000 worth of debt; however, treatment of home equity loan debt was more ambiguous. Many read the new law as eliminating the interest deduction altogether on home equity loans and lines of credit. Other tax professionals argue that the use of the loan proceeds is what matters.

Confusion Sets In

The confusion stems from language in the new tax law that erased the deduction for home equity debt interest between tax years 2018 and 2026, unless they use the debt to buy, build or improve the home. The debt also must be collateralized by the underlying home. In response to the ambiguity, the Internal Revenue Service recently issued guidance on how to handle deducting interest paid on home equity debt under the new tax law. The IRS clarifies that taxpayers can still deduct interest on home equity loans, lines of credit or second mortgages, regardless of the technical loan label or name, and that it is the use of the loan proceeds that matters.

Going into more detail on the new law, the IRS notes that you can deduct interest from refinanced debt if it meets all three of the following criteria:

  • The debt is secured by a qualified residence
  • The total of the refinanced debt is not greater than the cost of the residence
  • The proceeds are used to improve or expand the residence

All of this is subject to the new $750,000 (married filing jointly) debt limit on the total amount of all loans.

Examples, Please!

To help further clarify, let’s take a look at a few examples of the IRS guidance in action.

Example 1: On Feb. 3, 2019, Zach and Linda get a mortgage for $600,000 to purchase their primary residence with a value of $850,000. In March of the same year, the taxpayers obtain a home equity loan for $150,000 to add on to the house.

The primary residence secures both loans and the combined total of the loans is $750,000, so it neither exceeds the $750,000 mortgage loan limit nor does the cost of the home exceed the debt, so all interest paid on both loans is deductible.

Example 2: On March 14, 2020, John and Marcy take out a mortgage of $400,000 to buy a primary residence (loan secured by the property). In June of the same year, they buy a cabin in the woods as a vacation home and take out a loan for $200,000 to acquire it (loan is secured by the cabin).

Since the total of the two mortgages is $500,000 (below $750,000) and secured by the individual properties, all related interest is deductible. Note that if the $200,000 used to buy the cabin was taken as a home equity loan or line of credit against their main residence, then the interest paid on the $200,000 would NOT be deductible since it was not used to improve or add-on to the same property.

Example 3: On July 7, 2018, Bob and Stacy get a mortgage for $550,000 to acquire a house as their primary residence (loan is secured by the home). Later in October, they take out another $400,000 loan to buy a lake house as a vacation property (loan is secured by the lake house).

Despite the loans being secured by the individual properties, not all of the interest is deductible because the total of the two mortgages at $950,000, exceeding the $750,000 limit. Instead, only a percentage of the total interested paid is deductible.


As you can see, generally interest on home equity loans, lines of credit and refinances are still deductible as long as you reinvest in or add on to a qualified residence (within the debt limits). If you use one of these types of loans for something unrelated, such as paying credit card debt, taking a vacation or putting your kids through college, it’s not deductible – no matter what you call the loan.




General Business News March 2018

Tips on Running an Effective Email Marketing Campaign

According to Statista, of the globe’s 3.7 billion email users, 233 million live in America. The same report also projected that by the end of 2020, the number of email users in the United States will increase to almost 255 million. With a large global audience of email users, and experts forecasting an increase in the United States, how can organizations maximize this medium?

Collecting Customers’ Emails

Building an email list is the primary step in an effective email marketing campaign. While there are many ways to do it offline, such as asking for a caller’s email or having them write it down if they volunteer their information in person, the most efficient way to do so is online.

WordPress calls them “Welcome Gates” – a pop-up box that’s presented to the visitor immediately upon opening a website – and this is one way to get visitors to sign up for future emails. Offering a free eBook or a free gift, or perhaps a percentage off a future order can also encourage visitors to sign up for upcoming newsletters.

Along with having a static box contained within a Contact Us page that is always available for sign-ups, visitors can similarly be prompted to register for an email newsletter when they are visiting other pages or immediately before leaving. These are also known as “Lightbox pop-ups” and “Exit-intent pop-ups,” respectively.

Include a Direct Subject Line

Once a subscriber list is established, creating an attractive email for recipients to receive and open is the next step. Since people often quickly scan their inbox, one important element is to create an eye-catching subject line.

When it comes to creating a subject line, making one that’s succinct yet descriptive is essential to increase the effectiveness of an email marketing campaign. Much like an article’s headline is meant to attract the reader’s attention, examples of eye-catching subject lines might be “10 Things to Do Before Seeing Your Tax Preparer” or “Get 25% Off Orders Today Only.” These subject lines both educate readers and quickly demonstrate how they’ll benefit from opening and reading the email. Creating a sense of urgency or piquing the curiosity of how a recipient can improve his life will increase the email’s effectiveness.

Keep it Short

Paying attention to an email’s design is another important element. While there’s no hard and fast rule on the mix of images and text for email marketing messages, Dan Scalco, an INC Magazine contributor, offers a few recommendations to increase email marketing effectiveness. One is to limit the size of the message. Using high resolution images in a compressed format will enable emails to load quickly, keeping the attention of users who are going through their emails.

Scalco also recommends distinguishing an email marketing campaign from other emails within users’ inboxes by going beyond text. While using emojis might be only thought of for users who text, research suggests it might be an effective marketing tool. Citing an Experian report, Scalco explained that businesses have seen a 56 percent increase in email “open rates” when they used emojis. According to his estimate of the average person receiving 100 emails daily, emojis provide a way for brands to set themselves apart from other daily incoming emails. 

When designed and sent out at the right time of the day and week, email marketing can be an effective resource in a marketer’s toolbox.




Tip of the Month May 2018

Six Good Reasons Your Company Needs a Blog

So what’s all the fuss about blogs? Do they really help your business? Here are a few of the many reasons that they do.


  1. Helps with Organic Search – Every time you write a new piece of content, you create a new URL, which means that there’s a new opportunity for you to be found when customers search for information – when they’re looking for answers to their questions. You want to be there for them. You want them to come to you.
  2. Creates a Library of Unique Content –The more you write about your expertise – and from different perspectives each time – the more long-tail search terms you will create. This is increasingly becoming a good source for the majority of queries. And this way, you’ll have a better chance of bringing in some highly targeted search traffic.
  3. Contributes to Lead Generation/Inbound Marketing – So you’ve got all this great content, but you don’t want to give it away for free, right? Blogs are a great way to increase customer interest and engagement, as well as harvest data. Here’s how – offer free snippets or highlight segments of your killer content, but keep the rest gated behind a landing page or sign-up form. In other words, dangle the carrot. After customers have shared their info, they’ll get to revel in the riches of your powerful content and you get their info. It’s a win-win for both of you.
  4. Establishes You as a Thought Leader – You know your stuff better than your competition. It bears your thumbprint and sets you apart from the rest. Simply put, blogging shows that you’re a front runner in your industry. But that’s not all. Blogs also are a place where your customers can return to again and again for solutions. You become a trusted source, which increases traffic.
  5. Leads to Conversions – When the content on your blog offers real value, it helps establish trust with your customers – creating an emotional connection. When this happens, you have a greater chance of converting a lead to a sale. And this is something everyone wants.
  6. Integrates Well with Social Media – Once you’ve established your voice in the marketplace, push it out on social media. The effects of sharing your business tools and know-how from your blog on the web are exponential. Do the math. You know 500 people who know 800 people who know 1,000 people. The potential for engagements, which could end up as sales, are endless.