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Is interest on HELOC tax-deductible?

By utilizing your equity in your home, you can take out a home equity line of credit (HELOC). It is a second mortgage loan and it offers you the opportunity to meet your financial needs. This kind of loan is short term in nature and has some similarities with credit cards. Anyways, the interest that you pay on this loan is tax-deductible.

In order to become eligible for tax deduction on the interest, you must have taken out the HELOC after October 13, 1987. If you are a single, then your interest deduction is limited to $50,000 and if you are a married person, then the interest deduction is limited to $100,000. You have to report your deductible interest on Form 1040. In case of any tax related queries, you must consult a tax professional.

Is interest on a home equity line of credit deductible as a second mortgage?

adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

yes Richo the interest on a Heloc is tax deductible. Just refer to http://www.mortgagefit.com/know-how/equityloan-taxdeductible.html

Like | Dislike | Share | Posted: Tue, 07/31/2007 - 02:04 | Post subject:

adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Robert,

As far as I know, the interest that you pay on your second mortgage is tax deductible.

Like | Dislike | Share | Posted: Sun, 09/26/2010 - 21:54

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can taxes on a 2nd Mortage be used as a deduction on your federal income taxes? I plan to use the 2nd mortage loan to pay off a loan i have on a time Share.

Like | Dislike | Share | Posted: Sun, 09/26/2010 - 05:09 | Post subject:

Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Richo,

The interest on a [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] such as [url=http://www.mortgagefit.com/home-equity.html]home equity loan[/url] or Heloc is deductible as an itemized deduction.

Home equity loan and Heloc can be considered as either home acquisition debt or home equity debt depending upon the purpose for which they have been taken out.

If one uses the home equity loan/heloc to acquire, build or improve your home, it is known as Home Acquisition Debt. But if the same loan is not used to acquire, build or improve the borrower's home, it is called Home Equity Debt. Additionally, the amount by which the debt used to buy, build or improve your home is greater than the home acquisition debt, can also be considered as home equity debt.

For home acquisition debt, one can avail tax deduction as long as the total debt (including first and 2nd mortgage or the mortgages on your primary and second homes) does not exceed $1 million. The limit is around $500,000 if the borrower is married and files tax returns separately.

The home acquisition debt limit is reduced by the amount of the grandfathered debt. The grandfathered debt is any mortgage taken out against your home prior to 14th October, 1987. Such a debt may include a [url=http://www.mortgagefit.com/refinance.html]refinance[/url] of the loan taken before 14th October, 1987.

However, in case of home equity debt, one can get tax deduction on the first $100,000 of your home equity or $50,000 if the borrower is married and files separately. But one should have taken the mortgage against his home after October 13, 1987.

Now, the total home equity debt (which is tax deductible) is limited to the smaller of the first $100,000 or the total fair market value of homes (primary and second homes, if one has both) reduced by home acquisition and grandfathered debts.

Hope this is going to help you.

Good luck!

Like | Dislike | Share | Posted: Tue, 07/31/2007 - 04:23 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We don't have a security net of eight or nine months saved up in case my husband or I lose lose our job. We were told by an agent of a bank that we should get an iterest only HELOC . For ten years we would only pay interest on any money we borrow from it. We would only borrow from it if one of us lost our job and couldn't make our full mortgage payment. At the end of ten years, if we still owe on it we make interest and principle payments I believe for another ten years. we must keep it opened for three years or pay a penalty. Can having a HELOC like this lower our FICA score or hurt us in anyway and does it allow us to pay a portion of our mortgage if we had to?

Like | Dislike | Share | Posted: Fri, 02/20/2009 - 16:59 | Post subject:

jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Marie,

As far as FICO score is concerned, I don't think it will be hurt. It all depends upon the fact whether you will be able to pay it or not. If you cannot pay the debts, then your FICO score can go down.

Thanks

Like | Dislike | Share | Posted: Sun, 02/22/2009 - 21:10 | Post subject:

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