are home equity loans tax deductable?
It pays to read the small print — especially when it reads: “Consult your tax adviser.” Those words accompany almost every home equity loan or line of credit solicitation for good reason. Tax regulations allow many people to deduct all or part of the interest they pay on these loans, but there are exceptions. Because of these potential pitfalls, experts say people should educate themselves before borrowing against their homes. “If you have the option to take a home equity loan vs. going out and borrowing money at a higher rate which is not deductible and buying a car, then of course the home equity loan is going to be better,” says Sandra Raiter, a tax analyst with the tax preparation firm Jackson Hewitt Inc. in Virginia Beach, Va. At the same time, Raiter says, “People would get home equity loans — you see the ads with the football star saying, ‘Get a home equity loan and pay off your credit card bills’ … and then continue to charge on their credit cards. “It’s not something to be
It pays to read the small print — especially when it reads: “Consult your tax adviser.” Those words accompany almost every home equity loan or line of credit solicitation for good reason. Tax regulations allow many people to deduct all or part of the interest they pay on these loans, but there are exceptions. Because of these potential pitfalls, experts say people should educate themselves before borrowing against their homes. “If you have the option to take a home equity loan vs. going out and borrowing money at a higher rate which is not deductible and buying a car, then of course the home equity loan is going to be better,” says Sandra Raiter, a tax analyst with the tax preparation firm Jackson Hewitt Inc. in Virginia Beach, Va. At the same time, Raiter says, “People would get home equity loans — you see the ads with the football star saying, ‘Get a home equity loan and pay off your credit card bills’ … and then continue to charge on their credit cards. “It’s not something to be
It can only be on your first or second home, and there is a yearly limit on your total mortgage interest deduction. You can find a complete how-to on taking the deduction at eHow, and tax packages like TurboTax can automatically tell you if you qualify. Other good references are at Bankrate and, of course, the IRS (links to PDF of home-loan interest deduction rules). I short, unless you’re fabulously wealthy and talking about taking out an equity line on your 3rd, 4th or 5th home, you can probably deduct.
