Equity Home Loans

Are home equity loans tax deductible?

My husband and I took out a home equity loan last year. Is the interest tax deductible?

Public Comments

1. Short answer is Yes. Below are FAQs from the IRS website addressing that issue. Is interest on a home equity line of credit deductible as a second mortgage? You may deduct home equity debt interest, as an itemized deduction, if you are legally liable to pay the interest, pay the interest in the tax year, secure the debt with your home, and do not exceed certain limitations. For more information, refer to Publication 936, Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense. I took out a home equity loan to pay off personal debts. Is this interest deductible? Where do I enter this amount on my tax return? A loan taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts may qualify as home equity debt. The interest would be deducted on Form 1040, Schedule A (PDF), Itemized Deductions. The amount you can deduct as interest on home equity debt is subject to certain limitations. For more information, refer to Publication 936, Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.
2. I do not understand "home equity loan". If the question is about Indian taxation, then the answer is Yes, it is allowed as deduction. Home loan interest is allowed as tax deduction up to Rs.1.5 lakhs per year.