Answers
Can I pay off my car loan with my HELOC and the interest will be tax deductable?
What you use the funds for absolutely DOES affect the deductibility of the interest on a HELOC! Here are the basic rules, followed by my commentary on the advisability of doing this:
1. The HELOC must be secured by your home.
2. The interest is deductible subject to the usual $1,000,000 limit if it's used to purchase or improve your home.
3. The interest on up to $100,000 is deductible if the proceeds are used for anything BUT home purchase or home improvements.
Using a HELOC to pay off a car loan is usually a very bad idea. If you fall on hard times it's one thing to lose your car to the repo man but an entirely different bucket of turds to lose your home because you can't pay off the car note!
The value of the deductiblity of the interest on the HELOC is not likely to be as much as you think. If you pay $800 worth of interest and are in a 25% tax bracket you'll only save $200 in taxes. That's not a lot of benefit to risk your home for!
Unless you pay off the HELOC on the same schedule that your current car note has you'll be paying on that car long after it's been hauled off to the junk yard. Making payments on things that you no longer own is REALLY bad financial planning!
Lastly, your car note most likely has a fixed rate. Most HELOCs have a VARIABLE rate and that rate could easily rise above what you're paying on your car note. That could wipe out any benefit of the deductiblity of the HELOC interest as your total out-of-pocket costs could be higher in the long run.
Usually, if a person uses a home equity loan for debt consolidation, home improvements or to pay for tuition, the interest is fully tax deductible ...
Is yearly insertest paid on a Home Equity Line of Credit tax deductable?
Yes, but there is a limit. See excerpt from IRS.gov below:
"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 and second 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 (FMV) 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 that the last debt was secured by the home."
If you were to do a refi and make the HELOC part of your loan, you can deduct interest up to the first million dollars of mortgage debt.
Why pay closing costs on a home equity loan if a home equity line can be obtained at a comparable fixed rate and tax deductable?
Am I missing something here?
Pay closing cost if the contract terms have been breached, such as early repayment or late payment penalty.
The interest / "closing cost" / administrative cost is to make up loss earnings of interest income otherwise earned by the lending institution, as if you would have otherwise paid throughout the contracted term at the agreed interest rate implicit in the lease.
Loans are tax deductible depending on the situation as is equity line of credit. Usually, tax deductibility is based on the badges of trade or equivalent; all individuals, relating to persons are otherwise assessible to tax in the calender or accounting year preceeding the year of assessment.
9 Financing Options For Your Home Remodeling Project
You have a remodeling project in mind and you can’t wait to get started. It will create space in your home that you never thought existed. You have put your ideas on paper and then it hits you-how will we pay for this home project?
For many homeowners sitting down and discussing the financing of a home remodeling project is a scary thought. Most homeowners have no idea what remodeling projects cost until they get the first estimate. They then discover that major kitchen makeovers can cost more than most people make in a year. Home additions often cost as much as what you originally paid for your existing home. When it is time to discuss adding on or major renovations you will want to know what your options are for financing the project.
...News
Credit crunch: Home equity lending evaporatesChicago Sun-Times - Dec 29, 2009
Home equity lending gained popularity after 1986, the year Congress eliminated the tax deduction for interest on credit card debt but preserved deductions and more »The Coloradoan - Dec 27, 2009
With time, that asset can work for you in many ways, such as home equity lines of credit. > Investment appreciation. There are no guarantees of propertyLos Angeles Times - Dec 26, 2009
Home equity lending gained popularity after 1986, the year Congress eliminated the tax deduction for interest on credit card debt but preserved deductions and more »Leagle, Inc. - Dec 30, 2009
The tax appraisal put the value of the buildings [ 2 ] on the property at $145770, leaving a marital equity of $40130.40. {ΒΆ7} Another area of contentionTimes Herald-Record - Dec 27, 2009
After we've just instructed you to wipe out all possible debt, this next thing might sound odd: Take out a home equity line of credit.Chicago Sun-Times - Dec 17, 2009
These programs combine your checking account, home loan and home equity line of credit. They essentially become one master "sweep" account thatForbes - Dec 04, 2009
Wray didn't want to finance her business on credit cards or with a home equity line of credit. So she rolled over a Fidelity IRA, funded with her old