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From: ajf@pyuxa.UUCP (A Figura)
Newsgroups: net.taxes
Subject: Home Equity Loans & new tax law
Message-ID: <1375@pyuxa.UUCP>
Date: Wed, 8-Oct-86 12:37:46 EDT
Article-I.D.: pyuxa.1375
Posted: Wed Oct  8 12:37:46 1986
Date-Received: Thu, 9-Oct-86 06:16:02 EDT
Organization: Bell Communications Research, Piscataway N.J.
Lines: 24

I'm real confused about the impact of the new tax law on home equity
loans & second mortgages.  In the past, where some people advocated
taking as big a mortgage as your cash flow could handle (in general),
and when any interest payments were deductible, you knew where you
stood with an equity loan; it was basically an extension of your first mort.
If your cash flow had improved (and your house had appreciated - thank God
I live in a place like NJ, where its appreciated >50% in a year and a half),
why not take advantage of the extra equity and get the tax deduction?
Now I'm not so sure - will I lose the interest deduction next year
if I take out an equity loan now? Does it still make sense to even take one
(from either a tax-advantage or inflation-hedging point of view)?

I've heard conflicting views on the deductibility of equity loans/second
mortgages.  Does anyone have any specific details?  I've heard that you
can deduct combined interest payments up to the original cost of your home.
Therefore, if I paid $X for the house and got a first mortgage for $Y,
I could deduct any new loan up to $(X-Y). Right? Wrong??

Then I heard you could only deduct second mortgages for big-ticket improvements
(like a new deck or added room, for instance).  Then I heard, they're not
deductible at all.  Then I heard, only deductible if you closed before
August 86.  And you wonder why I'm confused??

Anybody got any enlightenment to offer?