Beginning in 2018, regardless of when incurred, home equity loan interest is generally not deductible under the new Tax Cuts and Jobs Act. The IRS has issued clarifying guidance that taxpayers, in certain situations, can continue to deduct interest on a home equity loan, a home equity line of credit or a second mortgage, as mortgage interest. All the interest paid on these types of loans is deductible if they are secured by a qualified residence and the total loans do not exceed the home's cost. Also, the total amount of these loans cannot exceed $750,000, reduced to $375,000 for taxpayers filing as married filing separate. The IRS provided some examples to clarify the new restrictions on the mortgage interest deduction, with the following result: 

• Interest on a home equity loan, secured by the main home, for building an addition to the existing house is deductible.
• If a taxpayer takes out a second loan to purchase a vacation home and the loan is secured by the vacation home, the interest is deductible. If the total amount of the first and second mortgages exceed the $750,000 threshold, a percentage of the total interest paid is non-deductible. 
• If a taxpayer takes out a home equity loan on a main home, to buy a second home the interest on the home equity is not deductible. The loan needs to be secured by the second home in order for the interest to qualify for the deduction.

Interest paid on a home equity loan used for personal expenses, or to pay off student loans and credit cards does not qualify for the mortgage interest deduction.

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