Home Equity Line Of Credit Tax Deduction

By using the HELOC, it's going to free up several hundred dollars per month, and I can claim it as a tax deduction at the end of the year. On the other side, I'm eating up a sizable amount of home equity by doing so. I'm planning to pay them off either way--I can do it now with the HELOC, or after I sell my house, with the cashed in equity. Which route should I go? Does it make a difference?

Generally speaking, debt is debt, so whether it's debt on your HELOC or a student loan or car doesn't matter. Using your HELOC is usally a better deal because the rates are lower and as you mentioned, you can deduct the interest. The only thing I would caution is if the property values in your area are going down, you may not want to extend your HELOC too much and end up with either no equity or oweing more than the house is worth.

2007-04-05 13:27:44 by djbod2006

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 ...

I have a home equity line with a balance of $87,000 at 7.99% and an offer for a credit card with 0% interest for a full year. I figured if I transfer $20,000 to the credit card I would save about $100 per month in interest. Is this a good idea? Will it hurt my credit to have that on a credit card? Is it better to leave it alone and take an interest deduction on my taxes?

No it is not a good idea. Yes it will hurt your credit. If you transfer the amount to a credit card it will no longer be tax deductible. The 0% will eventually go away after a year and you will probably still owe plus you take the risk if you miss a payment for any reason your 0% will go away. Check the small print. Also if you run up your credit card balance over 50% this will hurt your credit. 7.99% on a HELOC is not bad. If you want to reduce your payment check into combining your first and HELOC. Depending on various items it could reduce your payment.

2006-10-18 12:48:54 by kdk101001

I have both a federal student loan (already locked it in at 6.5%), and a private student loan, currently at 9.5% interest. In addition, I have a little bit of credit card debt (with 4.99% APR) and a home equity line (locked at 6.5%).
I understand the interest of the home equity line is tax deductible and I also understand the credit card interest is NOT tax deductible.
What about my student loans? What makes the most sense to pay off first?
Is my private student loan interest tax deductible?
Thanks for your help.
My credit card APR 4.99% is locked in.

The maximum amount of student loan interest that can be deducted is $2,500. If you are married filing jointly and make more than $100,000, the amount decreases. That being said I think the first thing you should pay off is the student loans. They have the highest interest rate and there is no limit on the amount of home loan interest that you can deduct so you don't need to pay that off right away.

2007-07-25 17:43:48 by wrensmitty

I am not sure of how it works but it said to deposit your money you pay your bills with into your line of credit account and pay from there. I understand this allows for the tax deduction but am uncertain on it works on paying off debt quickly anyone familiar with this concept?

You are probably talking about a home equity line of credit (HELOC, for short). You are pretty much taking out a second mortgage on your home and using this money to pay off the old debts. Since it is a lien against your home, the interest is tax deductible. Here's the tricky bit where a lot of people screw themselves: CUT UP THE CREDIT CARDS!!!! There is no sense in getting another $25k (or more) in new debt to pay off old debt, and then racking up the same old bills ALL OVER AGAIN. You'll kill your credit and you will seriously overextend yourself. Be careful and follow the plan.

2007-09-21 11:53:14 by ideame

My grilfriend and I own a house together. We have a mortgage, pay property taxes and have a home equity line of credit which we both make contributions to. One of us makes substantially more than the other.

Is it legal to apportion the tax deductions for the Property Taxes, Interest on the mortgage and Interest on the Home Equity line in a manner that minimizes our taxes as opposed to apportioning the deduction based on the amount we actually paid?

No.

In order to deduct the interest/tax you must do it both in the amount paid and the amount legally owed.

2008-03-24 10:30:14 by BostonJeffy