This week, the Internal Revenue Service (IRS) released a statement clarifying that taxpayers can continue to deduct interest paid on home equity loans. That could give a boost to the residential renovation industry, including manufacturers and installers of replacement doors and windows.

“WDMA is pleased that the IRS has made this decision quickly,” said Window and Door Manufacturers Association president and CEO Michael O’Brien. “This will allow certainty in the marketplace for consumers considering replacement projects, remodels and home additions as to whether their mortgage interest will continue to be deductible.”

The IRS issued the statement in response to a flood of questions from taxpayers and tax professionals about newly-enacted restrictions on home mortgages in the Tax Cuts and Jobs Act of 2017, which was signed into law at the end of December 2017. The new law allows deductions for interest paid on home equity loans and lines of credit that are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

For example, under the new law, interest on a home equity loan used to build an addition to an existing home could be deductible. However, interest used to pay personal living expenses or credit card bills wouldn’t be.

“The National Association of Home Builders applauds the announcement by the IRS clarifying that households can take a tax deduction on a home equity loan or home equity line of credit if the loan is used for home improvements,” said Randy Noel, NAHB chair and a custom home builder from LaPlace, La. “This is a major victory for remodelers and for home owners who want to invest in their homes. NAHB has been pushing hard for this outcome since December, when The Tax Cuts and Jobs Act of 2017 was signed into law. We will continue to work with Congress and the administration as they hammer out the details of the new tax law.”

The new law puts a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Starting in 2018, married taxpayers filing jointly will only be able to deduct interest on $750,000 of  loans. Previously, the limit was $1 million.

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