Hi,
I carry two loans on my house (one primary loan as mortgage) and second one that I recently got is the Home Equity Loan (to invest in business startup). I know that I was able to write off the interest off my primary loan, but I want to know can I also write off the interest that pay on my Home Equity Loan or not.

Any feedback or information will be appreciated.

Thanks
Raj

Genrerally yes. There are some rules about the total amount of interest you can write off. But interest on a HELOC is eligible for tax deduction.

Scott,
Thanks for the reply and answer to my question. Do you know up to how much (total) interest I can write or at least where can I find that information (if I need to perform some calculations).

Thanks

The HELOC interest can usually be deducted, as long as it is a secured loan (that is, your house is collateral and its recorded as a 2nd mortgage). But since you did not take the loan to buy, build, or improve you home there are a few limits to be aware of:

The amount of the loan can not exceed $100,000.
The amount of the loan can not exceed the fair market value of the house minus the first mortgage loan amount.

Interest on the portion of a loan above these limits can not be taken as a personal deduction. However, since the loan is for your business, you can treat it as a business expense on Schedule C.

See Pub 936 for lots of details:
Publication 936 (2007), Home Mortgage Interest Deduction (http://www.irs.gov/publications/p936/ar02.html#d0e187)