The IRS has issued a statement clarifying details of the new tax reform law passed in December of 2017 regarding mortgages and home equity lines of credit.

Beginning January 1, 2018:

• The mortgage interest deduction cap is lowered from mortgage debts of up to $1 million down to $750K, but it applies only to new mortgages created after December 31, 2017.
• The deduction of interest on home equity lines of credit (HELOC) up to $100K is eliminated.

The bill did not contain a grandfather clause for HELOCs or information on second mortgages, leaving tax professionals across the country with questions.
 

The IRS press release addresses these issues:

 
Whether the loan is labeled a home equity loan, a home equity line of credit, or a second mortgage (re-fi) is irrelevant. What matters is where the money went. If the debt was used to “buy, build or substantially improve the taxpayer’s home that secures the loan”, the interest will be deductible under the new law, up to the new limit of $750,000. This number is a total sum of debt and cannot exceed the value of the secured property. If the money was used for other expenses, like a vacation or paying down credit card debt, the interest will not be deductible.
 

For the interest to be deductible, the debt must:

Be secured by a qualified residence(s)
Not exceed the value of the residence(s)
Be used to acquire or substantially improve the residence(s)