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Is the interest on a HELOC currently tax deductible? If so, are there limitations such as loan $ used for debt consolidation?
My wife and I are considering getting around 80K loan to both consolidate debts (around 50K) and for home improvement (around 10K). Will we be able to take a deduction on the interest we pay on this, even though we're mostly using it for debt consolidation?
All of this doesn't jive with data I've seen on irs.gov. And Cupcake, it's not unusual for banks to counter with a lower line that what you ask for also, or for the borrower to cap it at the moon after the lender offers the stars. If you end up with a high line, you don't have to use it all. We don't have concern about showing potential borrowing liability on a credit report, if that's what you are getting at. I'll contact a loan agent and see if he/she can direct me to hard data on this.
3 Answers
- Wayne ZLv 76 years agoFavorite Answer
Probably.
With taxes, there are always exceptions.
HELOC interest is deductible in full for regular tax purposes. However, if you are subject to AMT, the portion used for anything other than buying, improving or maintaining your home will have to be added back.
- Anonymous6 years ago
Look at your 2014 taxes. Was there a form 6251?
If you did your own taxes using software, see if you can pull up the 6251 and see how close you were triggering AMT. As Wayne pointed out, the interest NOT incurred from buying, building or improving the home is added back for AMT purposes. As you pay the HELOC down, the principal for the other debts is assumed to be paid first.
- Trivial OneLv 76 years ago
The interest is likely tax deductible. But, the question is, why are you taking an $80,000 loan when you need only $60,000? You realize increases your monthly pay-back and that if you are unable to pay back the loan for any reason (one or both of you loses your job, becomes disabled, dies, etc.) you will lose your house? While HELOCs can be useful, they shouldn't be used like a bank account. Borrow no more than you really need and are likely to be able to pay back.
