Home Equity Loan Tax Deduction
You can borrow money against the value of your home with a home-equity loan or a home-equity line of credit. You can secure both with a second mortgage. Both provide access of up to 100% or more of the equity in your home.
A home-equity loan is usually distributed in one lump sum. Its rate is often fixed for the entire term of the loan.
You can access a home-equity line of credit at your discretion. Unlike a home-equity loan, the rate for a home-equity line of credit changes based on an index. It often converts to a fixed rate after a set period of time.
Both provide access of up to 100% or more of the equity in your home.
If you itemize, you might be able to fully deduct interest payments on either type of loan. This distinguishes these loans from other forms of consumer credit. Since the collateral is your home, interest rates are lower than other consumer loans or credit cards.
However, since your house is the collateral for these loans, failure to repay can cost you your home. Make sure you think carefully about what you plan to buy with your loan or credit line. A home-equity loan with a lower, set amount might be better than a flexible line of credit.
To learn more, see these tax tips:
- Second Home
- Self-Employment Deductions
Can you include the sales tax in the price of an item your claiming for a deduction? Learn more from the tax experts at H&R Block.
If you were pregnant most of the year, can you claim you baby or newborn child on your taxes? Get tax answers from the experts at H&R Block.
Heading to college and wondering what school expenses are tax deductible? Learn more about tax deductible education expenses with the experts at H&R Block.
Lean more about deducting car loan interest with help from the tax experts at H&R Block.