The answer to the question of whether interest on a home equity line of credit is tax deductible is maybe. If you need cash and have equity in your home, a home equity loan or line of credit can.
In addition, the interest on home equity debt is deductible, but up to a lower borrowing limit of $100,000 for most people. The limits for both types of mortgage debt are the same for single taxpayers.
The IRS allows you to deduct mortgage interest on a first mortgage but no longer can people deduct their home equity loan interest. Being able to do this is a major advantage of home ownership. Many homeowners cherish the ability to have their home equity loan interest be tax deductible, but that is all about to change in 2018.
Today, the Internal Revenue Service (IRS) finally issued guidance concerning deducting interest paid on home equity loans. Under prior law, if you itemize your deductions, you could deduct qualifying.
You can usually deduct the interest on a home equity line of credit taken against a rental home, relative to that rental home's income. However, calculating how.
Once again, to the extent the loan proceeds are used to acquire, build, or substantially improve the residence, the (reverse) mortgage debt is treated as acquisition indebtedness (and its interest is deductible as such), while (reverse) mortgage funds used for any other purpose are at best home equity indebtedness.
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The caveat is that you can only deduct interest on up to $750,000 worth of qualified residence loans – or $375,000 if you’re married but filing separate returns. – Certain interest paid on a home.
Mortgage vs. Home Equity Loan: Know What’s Tax Deductible Interest on a mortgage is tax-deductible for loans of up to either $1 million (if you took out the loan before December 15, 2017) or $750,000.
For example, interest on a mortgage used to purchase a second home that is secured by the second home is deductible but interest on a home equity loan used to purchase a second home that is secured by the taxpayer’s main home is not deductible. This is a relatively rare scenario, but if it applies to you, you should discuss it in more depth.