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0 pointsHWR_143y ago0 comments

> no mortgage interest deduction for equity debt

Wait, what? When did that happen?

And did the "for equity debt" mean that it still applies to houses?

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To clarify, these are technical terms for income tax purposes, and are not defined by any label a bank may put on a loan, such as "HELOC" (home equity line of credit).

Since 1987, whenever you originate or re-finance any mortgage, the portion of the proceeds used to buy, build, or improve your personal residence is called "acquisition debt" (used to acquire the asset), and the remaining portion is called "equity debt" since it is secured solely by the pre-existing equity in the property and is used for anything other than acquisition.

When you re-finance acquisition debt, it remains acqusition debt, but any cash-out from the re-finance not used to buy/build/improve is equity debt. As you pay down principal on the loan, you are considered to first pay off the equity debt, before acquisition debt.

HWR_14OP3y ago

Thanks.

That is a very clear explanation. It seems like that got caught up in the whole "no interest other than acquisition debt is deductible" rule change.

Also, I know you were enumerating items, not advocating for their return. I see the change as good, and didn't know if there is a countervailing point of view explaining why interest on equity debt should be deductible (possibly from the entity that educated you on the matter).

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