I Was Told to Take Out a HELOC for Tax Write-Offs, but Now I'm Questioning It

"Ramsey immediately addressed the fundamental problem with the advice. "There is no tax write-off for a HELOC on a personal residence," The Tax Cuts and Jobs Act of 2017 eliminated the mortgage interest deduction for home equity loans unless the borrowed money is used specifically to buy, build, or substantially improve the home securing the loan. Simply taking out a HELOC for other purposes provides no tax advantage."

"The HELOC interest deduction hasn't applied to personal use borrowing since 2017, yet advisors continue pitching it. The fundamental problem is that even when the deduction existed, it rarely made mathematical sense. Paying $10,000 in interest to save $2,500 in taxes still costs $7,500. Real financial advice focuses on building wealth through asset accumulation, not on creative ways to deduct the cost of borrowing."

A couple received advice to take out a home equity line of credit for a tax write-off. The Tax Cuts and Jobs Act of 2017 eliminated the mortgage interest deduction for home equity loans unless borrowed funds buy, build, or substantially improve the secured home. Taking a HELOC for other purposes yields no tax advantage. Advisors operating on pre-2018 rules or selling products without understanding regulations can leave clients with debt and no benefit. When deductions apply, interest paid often exceeds tax savings. Clients need advisors whose compensation aligns with client interests.

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