What Is Home Equity Line Of Credit

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Q. Can someone tell me if the monthly interest on my Home Equity Line of Credit is tax deductible. My initial mortgage is six months old and I already have approx 70K in equity in my new home (primary residence). My income is approx 100K/Year. Please let me know the tax ruling or where I can get further information.

A. Based on those facts (and that there are no other debts against the property), the interest on the line of credit is deductible. There are no tax rulings because this is addressed in the law itself. The source of the equity makes a difference. Did you have a big down payment when you purchased or have you paid for improvements or is the increase related to work you did yourself or is the home just now worth more than you paid for it. Not true at all. For AMT it is non-deductible if not used to acquire or improve a personal residence. For regular tax, the rules of lesser of $100k/available equity apply.

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