HELOC: Is the Interest Tax-Deductible?

Is HELOC Interest deductible for taxes? In this video, I'm going to answer that question as well as dispel some common myths about HELOC interest not being tax-deductible! - Especially when using a HELOC to pay off your mortgage!

And I often get this question quite a bit... "But Sam, using a HELOC to pay off the mortgage could mean that I wouldn't be able to deduct the interest I'm paying, therefore, I don't think it makes sense to use a HELOC to pay off my mortgage faster and save money on interest?"

I probably get this question nearly every day so I'll answer this question once and for all!

0:00 - Are HELOC Interest Tax Deductible?
1:12 - 2nd Lien HELOC Interest
2:24 - People pay the interest just to get a tax write-off
3:54 - 1st lien HELOC interest is deductible
4:48 - Potential Payoff Results

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#heloc #heloctaxdeduction #helocstrategy

Now right out of the gate, when people often ask me about the tax deductibility on HELOCs, they're often referring to a 2nd lien position HELOC. People automatically assume that HELOCs are not tax-deductible because they heard some other YouTubers say this.

Now, it is true that interest in 2nd lien position HELOC is not deductible when used to pay off the mortgage faster.

Prior to 2018, the tax laws were different from where the interest could have been deducted for a 2nd lien HELOC.

However, my argument to this is that if you're using the accelerated banking strategy to pay down your mortgage faster and saving a large sum of money, wouldn't it be better that you pay a little bit of taxes to have saved thousands?

Remember, a loan that has a 30-year amortization can cost quite a bit of money on interest.

Unfortunately, the logic for some people is to pay the interest just so that they can get a write-off.

It's kinda like my friend who bought a $45,000 truck just to get a tax write off on this business. But there is a way of making all of your HELOC interest deductibles.

There's a little less known version of the HELOC which is the 1st lien HELOC. If there's a 2nd lien HELOC, well... There's also gotta be a first.

A 1st lien HELOC is essentially the only loan on a house. Some of my students on our program use a 1st lien HELOC to replace their mortgage completely.

By doing so, they can take advantage of the revolving nature of the line of credit and get the interest deduction.

Many of them will end up paying off their HELOC in 5-10 years on average and potentially saving THOUSANDS of dollars on interest. They also get to deduct the little interest they would pay over the 5-10 years average.

Plus, they have an open HELOC to use for buying rental properties thus increasing their income as well.

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---DISCLAIMER--- The suggestions, advice, and/or opinions that are given by Sam Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold Sam Kwak, Novo Elite, Inc. and the Kwak Brothers brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based upon experience.

[theanimeaccountant]

if someone has a HELOC and did use it for home repairs and what not. What does the company issue said person to show how much interest they paid on the heloc? would there be some type of 1098 issued an amortization schedule, or do you have to calculate it yourself? Is the whole interest amount deductible on the HELOC at once or do you have to do it over a period of time?

[ramironava]

What makes more financial sense, pay more on an existing home mortgage or get HELOC?

[MrLOUIELOUIEG]

I just opened up an $50k HELOC. Would it be possible to apply the strategy to pay off my $310k mortgage sooner? If so how?Or should I use it to purchase a rental?

[chestertecson]

Is the first lien HELOC same as all in one loan?

[usaTutor]

Thank you for the clarification on types of helocs available and the benefit of having a first lien heloc. We are discussing it in our house, and I see a great benefit of having one, especially if the interest rate is comparable to my current (current is very good though so we will see).

[sdean]

hi Sam thank u for sharing, are we able to get 2nd position heloc or 1st position heloc on rental investment properties and what about rate variation for heloc in coming future