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Is the interest on my home equity loan deductible?
In most cases the answer is yes. The interest on home equity loans or lines of credit can be tax deductible (please consult your tax planner for exact details). That's why many people choose to get a home equity loan or line of credit to finance cars, boats or other high ticket items.
Interest on your credit cards or auto loans is not tax deductible. And because you're borrowing against an asset (your house), the interest rate is generally lower than other loan types.
In general, the interest is deductible on a home equity loan or line of credit up to $100,000. If you are married and filing separately, interest is tax deductible on a loan or line of credit up to $50,000. Again, it's important to consult a professional tax planner for the specific tax laws that apply to you.
What's the difference between a loan and a line of credit?
A loan generally is for a fixed period of time with an initial balance and fixed monthly payments. A line of credit is similar to a credit card in that it only requires payments when there is an outstanding balance. Contrary to a loan, there is no initial balance on a line of credit. You are required to make a minimum payment each month based on a percentage of the balance.
What can I use a home equity loan or line of credit for?
For anything you would like.
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