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.

Tax advantages

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.

Potential risks

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:

Related Topics

Related Resources

10 Ways Getting Married Affects Your Taxes in 2018

What happens to your taxes after marriage? Learn how marriage can lead to changes in tax filing and returns at H&R Block.

What Is a CPA or Certified Public Accountant?

What is a CPA, and how can one help you with preparing your taxes? Understand the role of a certified public accountant with the experts at H&R Block.

Is TurboTax Live the Best Virtual Tax Prep Option?

Looking for virtual tax help with your online filing? Learn more about your options by comparing TurboTax Live to H&R Block Tax Pro Review and Tax Pro Go.

Taxes Get Personal: What’s Your Filing Status?

Do you know what your tax filing status is? Learn how to determine and check your tax filing status with H&R Block.