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vaidola
Feb 19, 2008, 09:50 AM
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

ScottGem
Feb 19, 2008, 10:12 AM
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.

vaidola
Feb 19, 2008, 10:20 AM
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

ebaines
Feb 19, 2008, 11:31 AM
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)