How to Deduct Interest on a Home Equity Line of Credit

Interest on loans secured by your home can be tax deductible.

The interest paid on a loan secured by your home is tax deductible if you itemize your deductions. The Internal Revenue Services defines home equity debt as any loan taken after October 13, 1987, that is secured by your home and is not home acquisition debt. The loans that qualify for tax deductible interest are a first or second mortgage, a home equity line of credit or a home equity loan.

Instructions

1. Obtain Schedule A (Form 1040) if you will be itemizing your deductions. Forms can be obtained at many post offices, libraries or downloaded from the IRS website.

2. Enter on Schedule A, line 10, the interest reported to you on Form 1098 that you received from the financial institution holding your equity line of credit. Form 1098 must be mailed to you by January 31 with the total of interest paid the previous year.

3. Enter on Schedule A, line 11, any interest you paid that's not reported on Form 1098. For instance, a private person might have provided you with your loan. Enter the name, address and taxpayer ID number of your lender on the dotted lines.

References

• Turbo Tax: Deducting Mortgage Interest FAQs
• Internal Revenue Service: Publication 936, Home Mortgage Interest Deduction