Is My Home Equity Loan Tax-Deductible?
Learn how to take home equity tax deductions on the interest of your loan
Do you currently have a home equity loan? Make sure you take advantage of the home equity tax deduction*. You may be able to deduct home equity loan interest you pay. Depending on the size of your loan and the interest rate you received, this could help you reduce your taxable income by a couple thousand dollars.
Deducting home equity loan interest
So how does this work? The interest you pay on your home equity loan may be tax-deductible so long as:
- The loan is on your primary or secondary home. If you've got a loan on an additional property, it may not be eligible.
- You have not yet reached the maximum loan amount eligible for deduction. You should check with the IRS for the latest figures, but in the past the interest on a home equity loan up to $100,000 was deductible.
- You're not claiming a deduction for interest paid on any portion of the loan that exceeds the value of your home. Most lenders won't issue home equity loans that would give you a loan-to-value ratio of more than 100% anyway. In the event you do have one, the interest on the part of the loan that pushes that ratio over 100% is not eligible for deductions.
To take your home equity tax deduction, you will need to itemize deductions on Schedule A, noting the amount of interest you paid during the year and to whom you paid it. Your tax advisor can help you with this type of filing.
Learn about other benefits of home equity loans
Competitive interest rates and the home equity tax deduction make these loans a great way to consolidate debt. You can't deduct interest you're paying on cars, credit cards or other types of loans. But, if you can satisfy those loans by taking out a home equity loan and then paying that, you can find yourself some savings each year. Not only can you take the interest off your taxes, you can also enjoy some lower interest rates than you may find on other types of loans.
Your home equity loan can come in handy for many other things as well, including home repairs, expensive tuition or medical bills, or even funding expensive life events like weddings or the birth of children. No matter how you use your home equity loan, you can enjoy great rates and repayment terms that work for you.
You can begin the home equity loan application process online, and a Citizens Bank Home Loan Originator will contact you by the end of the next business day to complete your application and discuss next steps.
This page is intended to provide general tax information for home equity interest deductions. It is not to be used as tax advice and should not be relied upon in the preparation of a tax return. IRS rules and policy nuances may be complex in some areas. Taxpayers should consult with a competent tax advisor or the IRS to determine how their own circumstances are affected.