Is Your Home Equity Loan Interest Deductible?

Ask Ralph – Christian Finance: Home Equity Loans, Grocery Savings, and Everyday Expenses

Are you tired of feeling like your money is slipping through your fingers? Do you ever wonder where it all goes at the end of the month? Many people face these same feelings, but with a little knowledge and effort, you can take control of your finances and make your money work for you. Today, we'll tackle some common financial questions I often receive on Ask Ralph – Christian Finance. We'll explore the ins and outs of deducting home equity loan interest, discover practical ways to save on groceries without sacrificing nutrition, and identify those sneaky everyday expenses that might be draining your bank account. So grab a cup of coffee, settle in, and let's dive into these important financial topics—starting with the big question: Is Your Home Equity Loan Interest Deductible?

Check out the full podcast episode:

Christian Stewardship and Financial Wisdom

Before we get into the practical tips, let's first consider the foundation of our financial decisions as Christians. Our faith and values should guide how we handle our money. The Bible emphasizes the importance of stewardship, generosity, and integrity in managing our finances¹. We are called to be wise stewards of the resources God has entrusted to us, using them for His glory and the benefit of others³.

This means recognizing that everything we have ultimately belongs to God³. We are merely caretakers of His blessings. This perspective shifts our focus from accumulating wealth for personal gain to managing resources wisely to further God's Kingdom.

Here are some biblical principles to guide your financial journey:

• Give to God First: Prioritize giving back to God through tithes and offerings. This demonstrates our trust in His provision and allows us to participate in His work².
• Contentment and Gratitude: Cultivate contentment with what you have and express gratitude for God's blessings. Avoid the trap of greed and comparison, focusing on eternal treasures rather than material possessions².
• Honesty and Integrity: Conduct all your financial dealings with honesty and integrity. Be truthful in your financial reporting, avoid debt when possible, and fulfill your financial obligations faithfully⁴.
• Generosity and Compassion: Share your resources generously with others, especially those in need. Support your local church, charitable organizations, and individuals facing financial hardship¹.

By integrating these principles into your financial practices, you can experience true financial freedom and live a life that honors God.

What's the Secret to Deducting Home Equity Loan Interest?

Now, let's dive into that first question about home equity loans. Many homeowners wonder if they can still deduct the interest on these loans. With the ever-changing tax laws, it's essential to stay informed. Here's the key: you can generally deduct home equity loan interest if you use the loan to buy, build, or substantially improve the home that secures the loan⁵.

What exactly does "substantially improve" mean? According to the IRS, substantial improvements add value to the home, prolong its useful life, or adapt it to new uses⁶. This could include renovations, additions, or significant repairs that enhance your home's value.

If you use the funds for other purposes, such as paying off debt or taking a vacation, the interest is not deductible⁵. It's crucial to keep accurate records of how you use the loan proceeds to support your deduction when filing your taxes⁶.

Here are some important points to remember:

• You must itemize your deductions on Schedule A (Form 1040) to claim the home equity loan interest deduction⁵.
• The loan must be secured by your main home or a second home⁷.
• The total amount of mortgage debt, including your home equity loan, cannot exceed certain limits. For loans taken out after 2017 and before 2026, the limit is $750,000 for married couples filing jointly and $375,000 for single filers or those married filing separately. However, it's important to note that this provision of the Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025, potentially changing the deduction limits⁵.
• If you took out your loan before December 16, 2017, you might be subject to different limits⁷.

It's also important to consider whether itemizing deductions will provide a greater tax benefit than taking the standard deduction⁸. Many people find that the standard deduction gives them a better break, even if it means forgoing the home equity loan interest deduction.

One advantage of home equity loans is that they generally have lower interest rates than personal loans or credit cards⁹. This is because your home serves as collateral for the loan, reducing the risk for the lender.

It's always a good idea to consult a tax professional for personalized advice on your specific situation. They can help you determine if you qualify for the deduction and ensure you're maximizing your tax benefits.

7 Practical and Easy Ways to Save Money on Grocery Shopping

In today's economy, saving money on groceries is a top priority for many families. But how can you do that without sacrificing nutrition or taste? Here are seven practical and easy tips to help you stretch your food budget further:

1. Make a Meal Plan: Before heading to the store, plan your meals for the week and create a detailed grocery list. This prevents impulse buys and ensures you only purchase what you need. Sticking to your list can help you avoid those tempting extras that end up costing you more¹⁰.
2. Shop the Sales: Check your local grocery store flyers and online ads for weekly specials and discounts. Plan your meals around these sales to maximize your savings¹¹.
3. Buy in Bulk (Wisely): Purchasing items in bulk can save money, but only if you'll use them before they expire. Consider buying non-perishable items like pasta, rice, and canned goods in bulk¹².
4. Compare Prices: Don't assume that one store always has the lowest prices. Compare prices between different stores, both online and in-store, to find the best deals¹⁰.
5. Embrace Frozen and Canned Produce: Frozen and canned fruits and vegetables are often just as nutritious as fresh produce and can be significantly cheaper. Stock up on these when they're on sale¹¹.
6. Be a Savvy Substitute: Don't be afraid to get creative and substitute ingredients in your recipes. If a recipe calls for an expensive ingredient, see if you can swap it for a more affordable alternative. This can help you save money without sacrificing flavor or nutrition¹¹. For example, if a recipe calls for fresh herbs, consider using dried herbs instead.
7. Reduce Food Waste: Plan your meals to use up leftovers and store food properly to prevent spoilage. This minimizes waste and helps you get the most out of your grocery purchases¹².

Here are a few bonus tips to help you save even more:

• Shop at Farmer's Markets Later in the Day: If you enjoy shopping at farmer's markets, try going later in the day. Vendors often reduce prices as closing time approaches to avoid taking unsold produce home¹³.
• Avoid Pre-Prepared Convenience Foods: While convenient, these foods are often much more expensive than buying the ingredients and preparing the meal yourself¹¹. For example, buying a bag of pre-cut fruit is typically more costly than buying whole fruits and cutting them yourself.

By implementing these simple strategies, you can significantly reduce your grocery bill without compromising on the quality or nutritional value of your meals.

Budgeting and Expense Tracking Resources

To effectively manage your finances, it's essential to track your income and expenses. This helps you understand where your money is going and identify areas where you can cut back. Fortunately, there are many helpful resources available to assist you in this process.

Budgeting Apps: Several budgeting apps can help you track your spending, create budgets, and set financial goals. Some popular options include:

• YNAB (You Need a Budget): This app uses a zero-based budgeting approach, where you give every dollar a job. It helps you prioritize your spending and ensure you're not overspending¹⁴.
• EveryDollar: This app, created by Dave Ramsey, also follows the zero-based budgeting method. It offers a simple and user-friendly interface for tracking your income and expenses¹⁴.
• Mint: This free app from Intuit allows you to connect your bank accounts and credit cards to track your spending automatically. It also provides personalized insights and helps you create budgets¹⁷.
• Goodbudget: This app uses the envelope budgeting method, where you allocate your money to different categories or "envelopes." It's a great option for those who prefer a more visual approach to budgeting¹⁴.

Other Resources:

• Budget Worksheets: If you prefer a more hands-on approach, you can use a budget worksheet to track your income and expenses manually. Many free templates are available online¹⁴.
• Online Budget Spreadsheets: You can also use online spreadsheets like Google Sheets or Excel to create and manage your budget. These tools offer flexibility and allow you to customize your budget to your specific needs¹⁴.

By utilizing these resources, you can gain a clearer picture of your financial situation and make informed decisions about your spending and saving habits.

Everyday Expenses Draining Your Bank Account

Like a leaky faucet that slowly but surely wastes water, certain everyday expenses can silently drain your bank account. Identifying and addressing these expenses is crucial to achieving financial stability¹⁸. Here are some common culprits:

Subscriptions and Memberships:

• Streaming Services: Evaluate your streaming subscriptions and consider whether you're using them all regularly. If not, cancel those you don't need¹⁸.
• Unused Gym Memberships: Many people sign up for gym memberships with good intentions but rarely use them. If you're not consistently going to the gym, consider canceling your membership and exploring alternative exercise options²⁰.
• Other Subscriptions: Review all your subscriptions, including those for magazines, subscription boxes, and online services. Cancel any that you don't use or that don't provide significant value¹⁸.

Food and Dining:

• Dining Out: While occasional restaurant meals are enjoyable, frequent dining out can significantly impact your budget. Consider cooking at home more often or opting for more affordable takeout options¹⁹. By cooking at home, you control the ingredients and portion sizes, saving money and often eating healthier.

Impulse Purchases:

• Unnecessary Spending: Those small, unplanned purchases at the checkout counter or online can quickly accumulate. Before buying something, ask yourself if you truly need it or if it's just a fleeting desire¹⁰.

Household Expenses:

• High Utility Bills: Leaving lights on, using excessive heating or cooling, and neglecting energy-efficient practices can lead to high utility bills. Be mindful of your energy consumption and make adjustments where possible¹⁹.
• Brand-Name Products: Often, store-brand or generic products are just as good as their brand-name counterparts but at a lower price. Consider switching to these alternatives for groceries, household items, and medications¹⁰.

Transportation:

• Fuel Costs: With rising gas prices, fuel costs can be a significant drain on your budget. To reduce these costs, consider keeping your vehicle lighter, checking your tire pressure regularly, and using websites or apps to find the cheapest gas stations in your area²¹.

By becoming more aware of these everyday expenses and making conscious choices to reduce them, you can free up more money for savings, debt repayment, or other financial goals¹⁸.

Conclusion

Managing our finances wisely is essential for achieving our goals and living a fulfilling life. By understanding the rules for deducting home equity loan interest, implementing practical grocery saving strategies, and identifying those sneaky everyday expenses, you can take control of your finances and make your money work for you.

Remember to approach your financial decisions with a Christian perspective, prioritizing stewardship, generosity, and integrity. Start by acknowledging that everything you have is a gift from God and that you are called to manage those gifts wisely. This includes giving back to God, being content with what you have, and making financial decisions with honesty and integrity.

By incorporating both practical strategies and Christian principles into your financial life, you can experience true financial freedom—the freedom to live a life of purpose, generosity, and impact. If you need further guidance on your financial journey, don't hesitate to seek advice from a trusted financial advisor or Christian counselor. May God bless you on your path to financial freedom!

Works cited

1. Money Matters! A Christian Perspective on Financial Ethics | Board of Retirement, accessed February 16, 2025, https://boardofretirement.com/money-matters-a-christian-perspective-on-financial-ethics/
2. Biblical Financial Principles and 5 Practical Steps to Live by Them, accessed February 16, 2025, https://www.christianstewardshipnetwork.com/blog/2023/6/22/biblical-financial-principles-and-5-practical-steps-to-live-by-them
3. LIVING AS A FINANCIAL STEWARD - Money and the Gospel, accessed February 16, 2025, https://moneyandthegospel.com/financial-stewardship/
4. Christian Financial Concepts: Navigating Finances with Faith and Stewardship - Cooke Wealth Management, accessed February 16, 2025, https://www.cookewm.com/blog/financialplanning/christian-financial-concepts
5. Is Home Equity Loan Interest Tax Deductible? - Discover, accessed February 16, 2025, https://www.discover.com/home-loans/articles/is-home-equity-loan-interest-tax-deductible/
6. Are Home Equity Loans And HELOCS Tax-Deductible? - Bankrate, accessed February 16, 2025, https://www.bankrate.com/home-equity/home-equity-loan-tax-changes/
7. Home Mortgage Interest Deduction - IRS, accessed February 16, 2025, https://www.irs.gov/pub/irs-pdf/p936.pdf
8. Are Home Equity Loans Tax Deductible? - Rocket Mortgage, accessed February 16, 2025, https://www.rocketmortgage.com/learn/are-home-equity-loans-tax-deductible
9. Home equity loan tax deductions: What to remember this tax season - CBS News, accessed February 16, 2025, https://www.cbsnews.com/news/home-equity-loan-tax-deductions-what-to-remember-tax-season-2025/
10. How To Save Money When Grocery Shopping | Community First Credit Union, accessed February 16, 2025, https://www.communityfirstfl.org/resources/blog/how-to-save-money-when-grocery-shopping
11. 10 Ways to Save Money on Groceries When Eating Healthy - Everyday Health, accessed February 16, 2025, https://www.everydayhealth.com/diet-nutrition/how-save-money-on-groceries-when-eating-healthy/
12. How to Save Money on Groceries - Ramsey Solutions, accessed February 16, 2025, https://www.ramseysolutions.com/budgeting/ways-to-save-on-groceries
13. I'm trying to stick to a budget while still eating healthily. What are some practical tips and strategies for budgeting food expenses without compromising on nutrition or flavor? - Reddit, accessed February 16, 2025, https://www.reddit.com/r/budgetfood/comments/1dipcf8/im_trying_to_stick_to_a_budget_while_still_eating/
14. The Best Budget Apps for 2025 - NerdWallet, accessed February 16, 2025, https://www.nerdwallet.com/article/finance/best-budget-apps
15. 9 Free Expense Tracker of 2025 - FreshBooks, accessed February 16, 2025, https://www.freshbooks.com/hub/expenses/free-expense-tracking
16. Budgeting Apps - Financial Literacy - Research Guides at Purdue University Libraries, accessed February 16, 2025, https://guides.lib.purdue.edu/c.php?g=1171310&p=9343131
17. Budget Tracker & Planner | Free Online Money Management | Mint, accessed February 16, 2025, https://mint.intuit.com/
18. 16 Ways to Cut Costs: Strategies for Reducing Expenses - Debt.org, accessed February 16, 2025, https://www.debt.org/advice/how-to-cut-expenses/
19. 12 Ways to Cut Spending and Expenses Effectively - InCharge Debt Solutions, accessed February 16, 2025, https://www.incharge.org/financial-literacy/budgeting-saving/how-to-cut-your-expenses/
20. 10 Bills You Can Negotiate to Reduce Your Household Expenses, accessed February 16, 2025, https://davidsklar.com/blog/10-bills-you-can-negotiate-to-reduce-your-household-expenses/
21. 10 ways to reduce your living costs | Ben support for life, accessed February 16, 2025, https://ben.org.uk/how-we-help/for-me/articles/reduce-your-living-costs/