Take a look at the HELOC product lines at your bank by Tim McTaggart

With the Trump tax bill last year, there were significant changes regarding the continued permissible deductibility of various individual expenses. Most notably, the state and local tax deduction was capped at a level of $10,000.

Likewise, there were significant changes in connection with the continued deductibility of residential mortgage interest payments. This blog posting does not permit a full recitation of the changes but in general new mortgages up to $750,000 in principal would still qualify for mortgage interest deductions for personal tax purposes.

What is critical for bankers and their boards is to make sure that their institution is also up to speed on the continued ability to deduct home equity line of credit expenses as part of the overall mortgage interest deduction, to the extent permitted by the $750,000 cap and other related restrictions pertaining to the use in acquiring/expanding real estate improvements. There are more burdens on borrowers/taxpayers under the new requirements but if the taxpayer continues to itemize then interest payments on a residential HELOC may still be available as a tax deduction. Banks need to advise borrowers to consult with their own tax advisers but banks also need to make sure that in their marketing and other consumer communications that they are not overstating the benefits of a HELOC or misleading consumers regarding the ability to use a HELOC for consumer purchases or other non-real estate purchases now that the tax law has changed and that is no longer permissible. It may require a “fresh pair of eyes” from outside the organization to make a compliance report to senior management and the board on these issues.
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Mr. McTaggart is the former Bank Commissioner for the state of Delaware and also served at the Fed and as Counsel to the U.S. Senate Banking Committee. Mr. McTaggart can be retained as a consultant by banks and other comparable financial parties for a fee plus expenses to provide services to senior management and boards of directors. Over his career, Mr. McTaggart has advised boards, independent directors, special committees, audit committees, lead directors, risk management committees and compensation committees on banking/financial services issues.