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Thinking about purchasing a beach cottage or ski chalet? If you are shop- ping for a vacation home, bear in mind that the new tax laws may have an im- pact on how you choose to pay for that property. The Tax Cuts and Jobs Act of 2017, passed by Congress in December and effective on Jan. 1, made some signifi- cant changes that may affect owners or purchasers of luxury homes. The new rules limit deductions of mort- gage interest and property taxes. They also limit the deductibility of interest on home-equity loans, home-equity lines of credit (Helocs) and second mortgages—loans that some home- owners use to tap the equity on their primary residences to pay for vacation homes. While the new tax provisions don't en- tirely eliminate the deduction of inter- est on Helocs, they limit it to situations where the proceeds are used to buy, build or substantially improve the home Want a Vacation Home? The Tax Cuts and Jobs Act of 2017 is changing how buyers pay for that beach cottage or ski chalet. that secures the loan. So if vacation-home buyers use Helocs on their primary resi- dences to purchase vacation homes, they can't deduct the interest on the Helocs, ac- cording to the Internal Revenue Service. Yes, things have changed. Heloc purchases have pretty much dried up since the begin- ning of the year in many parts of the coun- try, as a direct result of this new law. As a result, it is now more likely for folks to encumber their vacation homes with a first mortgage. Interest on a second home is still deductible as long as the total amount of both mortgages doesn't exceed $750,000. Of course, mortgage-interest rates—even those on a Heloc—remain historically low - for the time being, so many homeowners, particularly affluent ones, may feel com- fortable using a Heloc for a vacation-home purchase even if the interest is not deduct- ible. For some, that may even be preferable to liquidating a portfolio to finance the purchase. Check the Tax Laws First