Why aren’t more people talking about this tax change?

Although the limits on state and local property taxes has gotten most of the attention, one of the amendments to the tax code will have a potentially large impact on credit unions has to do with loans taken out based on a home equity. Among the changes advanced by the “Stable Genius” running the country – his words not mine – and his acolytes, is one that does away with the deductibility of home equity loans.

I’m really surprised this hasn’t gotten more attention. It means that the member who has been planning to help pay for their kid’s education by taking out some of the equity on their home, or hopes to pay an unexpected medical bill is in for a rude awakening.

While Congress has completely done away with the deductibility of home equity interest, it has also reduced the amount that can be deducted for so-called “acquisition indebtedness.” As the conference report on the tax bill explains, “Acquisition indebtedness” generally means debt incurred in, or that results from the refinancing of debt incurred in, “acquiring, constructing, or substantially improving” a qualified residence. Id. § 163(h)(3)(B)(i). This means that there will still be at least limited interest on the part of some members who are doing a major construction or remodeling job. It also means that you will get members asking their front line staff if they feel the purpose of the loan will qualify for a tax break. Of course my advice is not to answer that question. I’m just here to tell you that your employees will be getting it.


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