Is a home equity line of credit tax deductible?

Answer 1

Interest on home equity loans is deductible.within limits.

Answer 2

If you file a Schedule A the interest you pay on a home equity line of credit is tax deductible.

There are specifics for the deduction of interest paid on home equity line of credit.

Prior to October 13, 1987 there is what is called "Grandfathered Debt", after October 13, 1987 there are specifics as to how you use the line of credit.

There is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your main home is limited to the smaller of:
$100,000 ($50,000 if married filing separately), or

The total of each home's fair market value reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date the last debt was secured by the home.

Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible. But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible.

If part of a home is not a qualified home, you need to figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home.

The Fair Market Value is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Sales of similar homes in your area, on about the same date your least debt was secured by the home, may be helpful in figuring the FMV.

Answer 3

The loan itself is not deductible but the interest you pay is.