Is interest paid on a home equity loan tax deductible?

A Home Equity Line of Credit is like a credit card. You can borrow money up to your credit limit, and you only get charged interest on the portion that you borrow. You can pay down the balance, then reuse the credit. Most have a draw term, usually 5 to 10 years, where you can draw money out, then the loan is paid back over a 10 to 15 year period. You may also elect to refinance the Equity Line and get another 5 to 10 years to use the line of credit. You choose what you want to do with your home equity line of credit: Remodel your home Take a vacation Consolidate bills Buy a car, boat or RV Finance tuition or other expense Use it as an emergency fund There are many features of HELOC loan programs. Ask your Loan Officer to help you decide which is best for you. Great Rates: rates can be below the prime rate on some programs. No Loan Fees: No appraisal fee or closing costs. Convenient Closings: Some programs allow doc signing in your home. Credit lines or maximum loan limits vary with ...  more

As always seems to be the case with income taxes, the answer is a definite MAYBE! First, the loan must be secured by your residence. That is, the lender must have a mortgage interest in it. Don't confuse “home improvement” loans, which are just one type of personal loan, with qualifying “home equity” loans. The interest on an unsecured home improvement loan isn't deductible. Second, the residence securing the debt must either be your principal residence (essentially, the home you live in most of the year) or a single second residence, for example, a vacation home which you use for at least part of the year. If you own more than one “second” residence, a home equity loan secured by only one of them (your choice) can qualify. Third, although, as noted above, home equity debt doesn't have to be used on the home, there are limits on the amount of debt than can qualify. Specifically, qualifying home equity debt can't exceed the lesser of (a) $100,000, or (b) your equity in the home ( ...  more