Howdy slav-ga,
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It appears that in most cases you can deduct at least some of the interest
that you pay for a home equity loan.
If you need Acrobat Reader to view the PDF document referenced below, you
can download it free from the Adobe website.
http://www.adobe.com/products/acrobat/readstep2.html
The Internal Revenue Service (IRS) Publication 936 titled "Home Mortgage
Interest Deduction" covers the details.
http://www.irs.gov/pub/irs-pdf/p936.pdf
The above document has worksheets and examples on what is allowable,
especially additional limits if part of the house is used for business.
This TaxACT web page explains it in easier to understand language.
http://www.taxact.com/reference/library_culture_consult.asp
The first limitation is that interest is deductible only for the first
$100,000 of the home equity debt or $50,000 if married filing separate.
The TaxACT page above addresses the second limit quite nicely.
"... the interest is deductible to the extent that the home equity loan is
not more than the remaining equity in your home at the time the loan is
issued.
For example, if you own one home that you purchased in 2000, its fair market
value is now $120,000 and the balance of the original mortgage is $100,000.
In this case, $20,000 is the most that could be borrowed that would qualify
for the mortgage interest deduction. If more than $20,000 is borrowed, the
interest on the limit is still deductible, but the remainder is not."
You will want to read the above referenced IRS document for possible other
limitations on home equity loan deductions. You should get a form 1098 from
your lender, but if you don't then there is a line on the Schedule A, which
is the IRS Itemized Deductions form, where you can enter the interest amount.
If you need any clarification, please feel free to ask.
Search strategy:
Google search on: interest "home equity loan" "tax deductible"
://www.google.com/search?q=interest+%22home+equity+loan%22+%22tax+deductible%22
Looking Forward, denco-ga - Google Answers Researcher |
