Dave Ramsey: 'There's No Such Thing as a Tax Write-Off on a HELOC'

"On a November 21 episode of The Dave Ramsey Show, a caller revealed their financial advisor recommended taking out a $50,000 home equity line of credit for the tax write-off. The couple followed this advice but now questioned whether it made sense. Ramsey dismantled the recommendation immediately. "There's no such thing as a tax write-off on a HELOC unless you use it to improve the home," he explained. The caller confirmed they used the money for other purposes, meaning zero tax benefit existed."

"The couple now carried $50,000 in what amounted to consumer debt secured by their home, based on outdated or incorrect advice. "You got bad advice," Ramsey said. "You need to pay this off as fast as possible." The tax deduction for home equity interest only applies when funds directly improve the property securing the loan. Using a HELOC for vacations, cars, or general expenses provides no tax advantage while putting your home at risk."

The 2017 Tax Cuts and Jobs Act eliminated most HELOC interest deductions. A couple followed a financial advisor's recommendation to take out a $50,000 HELOC for a supposed tax write-off and used the funds for non-home improvements. No tax benefit existed and the loan effectively became consumer debt secured by their home. Expert advice confirmed that HELOC interest is deductible only when borrowed funds directly improve the property securing the loan. Using a HELOC for vacations, cars, or general expenses provides no tax advantage while putting the home at risk. Homeowners should verify tax-related recommendations and treat any product sold primarily for tax benefits with skepticism.

Read at 24/7 Wall St.