| |
|
Tax Advantages
One great advantage to a home equity line of credit is the potential tax benefit. Most states permit similar deductions. For specific information on how a home equity line of credit will affect your taxes, be sure to ask your tax advisor.
Generally, most of our customers will get full deductibility for the following uses of a home equity line of credit:
-
Home improvement
-
Debt Consolidation
-
Purchase of major assests for personal use
-
Financing education
These expenses are deducted from gross income
before calculating the taxes owed. So if you pay $3,500 a
year in home equity loan interest, you deduct $3,500 from your gross income.
That's $3,500 less of your income that can be taxed if you already itemize
deductions. Which can make a huge difference in your tax bill. (Figures cited
are for example only.)
 | | Some important points to consider: |
| | | |
| You can take these tax deductions only if you itemize your deductions (rather than using the standard deduction). |
| | | Interest is typically tax deductible except in some cases for home equity lines of credit where your draw exceeds $100,000 and no improvements are made. |
| | | Homeowners who have paid down considerable principal over the years may not get full deductibility in some cases. |
|
| | |
Home expenses that typically aren't tax-deductible:
-
Home improvement expenses (other than interest on a home improvement
loan)
-
Closing costs, except discount points
-
Appraisal or loan application fees
-
Annual or other fees, if any
For complete details on how deductibility of home loan interest and other expenses will affect your specific tax situation, ask your tax advisor. Or review a copy of
IRS Publication 936, Home Mortgage Interest Deduction. Or you can call 1-800-TAX-FORM (1.800.829.3676) to order a free copy.
|
|
|
. Some products may not be available in all states.