our HELOC interest tax-deductible in this video and I'm going to answer that
question as well as dispel some myths and rumors about he lops not being tax
deductible especially when you're using a HELOC to pay off your mortgage
hey what's going on real this is Sam Kwok here one of the Popular's and
chances are you've seen some of my other videos about using a HELOC to pay off
your mortgage and very often I get questions about he locks not being tax
deductible right you know hey Sam I heard that he live taxes are not
deductible when I file my taxes therefore I don't think this strategy
makes sense why would we use a HELOC to pay off our mortgage if we can't deduct
the taxes right and I probably get this question almost every single day so I
finally came around to make a video to answer that question for you guys and by
the way if you want more videos about using a heal after paying off your
mortgage as well as investing in real estate and buying rental property
definitely subscribe to a channel if you want more videos just like this and as
always just disclaimer I am NOT a CPA I am NOT an attorney so therefore please
don't take this as a tax advice this is simply my interpretation of the tax laws
when it comes to using a HELOC to paying off your mortgage so make sure you talk
to your CPA so that you get the correct information based on your own unique
situation now right out of the gate when people ask me about helix not being tax
deductible they're also referring to the second lien position
HELOC and unfortunately people automatically assume that all he laughs
are not tax deductible because they seen some video on YouTube and they watch
then Dave Ramsey who are they seen some other people that talk about this but it's
simply not true now it is true that the interest on a second lien position HELOC
is not deductible under taxes when used to paying off your mortgage prior to
2018 the tax laws were a little bit different where you could have been able
to go and deduct the interest on a second lien position HELOC but that has
changed after 2018 however my argument to this is that if you're using the
accelerated banking strategy using a HELOC to paying off your mortgage you
can potentially save several hundreds of thousands of dollars on interest and
save several years on paying down your mortgage remember a loan on a 30-year
amortization can cost quite a bit when it comes to the interest for example
let's say you have a hundred thousand dollar loan with a three percent
interest rate on up there your amortization at the end of the 30
year payoff period you would have paid approximately 51,000 dollars of interest
so that's effectively 51% effective interest rate unfortunately for some
people the logic is to go and pay that amount for the interest just so that
they can save couple thousand dollars on the taxes and another example it's kind
of like my friend who bought a forty five thousand dollar truck just so that
he can get a business tax write-off and he said you know Sam I saved a couple
thousands of dollars on my taxes well first of all he lives in the city second
thing he probably uses a truck maybe once every month right so he literally
spent forty five thousand dollars cash just so that he can save a couple
thousands of dollars and he's not using the truck but it's kind of like the old
logic of tripping over a quarter just to pick up a penny so had he not spent that
forty five thousand dollars paid a little bit of taxes he could have used
that money to go and buy rental properties or to go invest in stocks or
do something else rather than spending forty five thousand dollars on the truck
that's sitting in a parking garage or you can use that money to go and
smash the like button on this video for the YouTube algorithm though bottom line
do you really want to pay that much of interest just to get a tax write-off or
save that money pay little bit of taxes and come out ahead with a net positive
so even if the second lien HELOC interest is not tax-deductible the
savings to get by using the strategy still outpaces the amount of money
you're saved by using the interest as a tax write-off instead of straight up
paying the interest plus the amount of time you'll save is gonna be
astronomical so you definitely don't want to miss on that but there is a
potential way of making all of your HELOC interest becoming tax-deductible
and again I'm not a CPA this is not a tax advice please go do your own
research and consult your own CPA now there's a little less known version of
the HELOC known as the first lien HELOC and of course if there's a second lien
HELOC there's got to be a first thing he'll hug right so a first thing HELOC
is essentially the only loan on your property so if you already have a
mortgage and you go and get a first thing HELOC if first thing he lock will
replace your mortgage so it'll be the only loan that only mortgage that you'll
have on your property by getting a first thing he lock not only do you get the
advantage of using a revolving line of credit but you can also potentially
write off the entire interest amount that you would pay on a first lien
Keylong and also not too many firstly HELOC interest rates are very
comparable to 30-year fixed-rate so the argument that the HELOC interest rates
are higher than our 30-year mortgage is simply not true and that goes out the
window many of the students on my program has
already completely replaced their mortgage with the first lien HELOC which
gives them the ability to pay down their mortgage faster and also use that first
thing HELOC later on to go and buy more rental properties that if they want to
many of them will end up potentially paying off their HELOC within five to
ten years saving them several hundreds of thousand dollars of interest and
getting to deduct the little interest that they would end up paying using the
strategy so if you have not seen my video of using the he'll off to paying
off your mortgage or completely replacing your mortgage in the first
place go and definitely check out that video
I'll leave that video down below in the video description all you have to do is
click and go and check out what the strategy is all about so there you have
it folks if you've been wondering about the tax deductibility on a HELOC
interest I hope this video answers your question so if you want more information
about the strategy as well as getting help from us in paying off your mortgage
using a HELOC go and download our calculator to see how much you can
potentially save not only we're time but also the amount of interest that you'll
save using this strategy and again I'll leave that link down below in the video
description of this video if you enjoyed this video so far go and subscribe to a
channel if you want more information about paying down your mortgage faster
using a HELOC as well as buying rental property real estate definitely go and
subscribe and check out some of the other videos that we have