Home equity loan interest
You can claim an itemized deduction for your home mortgage interest on acquisition debt — that is, debt secured by the home and used to buy, build or substantially improve it — on up to $750,000 in principal ($375,000 if married and filing separately) on home purchases made after December 15, 2017.
Interest on existing acquisition debt of up to $1 million in principal for home purchases made prior to December 16, 2017 is “grandfathered” and remains deductible. The higher $1 million principal limit also applies to acquisition debt incurred before December 15, 2017 that is subsequently refinanced.
Home equity interest – interest on mortgage debt to pay for anything other than to buy, build or substantially improve a residence – is not deductible. Additionally, existing home equity debt is not grandfathered.
It is now more important than ever for homeowners who can itemize to keep separate track of acquisition debt and home equity debt going back to the original purchase of a residence.