REFI 2018 tax implications.

[Nicholas Guy]

Hi BP, Im relatively new to your community and trying to soak it all in . I had an idea to refi my house to payoff student loan debt. This would give me a lower interest rate on both and allow me to write off the interest. I cannot write off my student loan debt currently. I was just reading an article on BP that stated the new tax reform would not let me write off the Refi interest. CAn anyone tell me if this is true and if so to what extent? TIA

[Michael Plaks]

Originally posted by @Nicholas Guy:

Hi BP, Im relatively new to your community and trying to soak it all in . I had an idea to refi my house to payoff student loan debt. This would give me a lower interest rate on both and allow me to write off the interest. I cannot write off my student loan debt currently. I was just reading an article on BP that stated the new tax reform would not let me write off the Refi interest. CAn anyone tell me if this is true and if so to what extent? TIA

Student loan interest is still deductible, as long as your income is not too high.

The refi interest will be deductible up to the initial loan amount. Example: when you purchased the house, you had a $200k loan. The house appreciated since that, and the refi loan is for $250k. The interest is deductible on $200k out of $250k - i.e. 80% of the interest is deductible. This is not the new law, by the way. The current law is the same.

What is not deductible under the new law is home equity loan. In my example, it would be leaving the old $200k loan in place and getting another $50k equity loan.

The rules are a little trickier than my simplified example, but I hope it gives you an idea.