What are the specifics of calculating home equity loan interest tax deduction?


Home equity loan interest tax deduction is pretty straightforward if you know the rules and you have a single real estate property; but you could get entangled if you have several properties, several mortgages and home equity loans, or equity loans exceeding property value.

Home equity loans can be used as first or second liens. They are commonly used as second mortgage loans, and as such interest is generally deductible in full on the first $100,000. For larger home equity loan amounts, if your loan was used to add a new bedroom wing to your house, or fix the garage - that is, for home improvements - tax deductibility applies for amounts of up to $1,000,000 - much as first mortgage loans.

At the same time, if you are married and filing separately or jointly, different rules apply. Also, if you have second and third, etc. homes, or pure investment properties, interest tax deduction calculation on home equity loans is getting in the dire. You will need professional help from a tax advisor.

To educate yourself on different tax issues, research the internet for most recent IRS publications.

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