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shannahan · Mar 13, 2009, 09:27 AM

I want to use my home equity loan to pay for upcoming cosmetic dentistry. The cost of the dentistry will be well within the allowed limit for deducting home equity interest. (My house is worth $1.5 million and our current acquisition debt is $68,000, which is the only debt secured by our house.) Can I pay the dentist with a credit card and reimburse myself by writing a check from the home equity loan account, or do I need to pay the dentist directly from the home equity account in order for the interest to be deductible? I would like to use my credit card because it offers a cash reward. Thanks for your help.

ScottGem · Mar 13, 2009, 10:35 AM

Yes you can use the card. The deductibility of a HELOC depends on the amounts, not what its used for.

shannahan · Mar 13, 2009, 10:40 AM

Just curious -- are you a tax professional? I see "computer expert" under your user name. I'm new to this website and am wondering if all questions are answered by real experts or if they can be answered by anyone who visits the website.

ScottGem · Mar 13, 2009, 12:10 PM

Anyone can answer any question here. But there are also people who are professionals in their fields. That doesn't mean that I don't have knowledge of tax laws or that some of our tax experts don't have knowledge of computer issues. Since I have a HELOC and have been claiming the interest on it for several years, I'm aware of the rules governing deductibility of HELOC interest so I knew the answer to this question. We do take pride in the quality of the advice we give here so people posting incorrect answers are generally swiftly dealt with.

Just to make you feel better I'll quote from this site:
http://ezinearticles.com/?Home-Equit...oans&id=213235

According to Wells Fargo Bank, interest payments are usually fully deductible on:
...
• Home equity loans and lines of credit, if total amount of home equity debt on your main and second homes does not exceed $100,000 ($50,000 for married filing separately) and the total outstanding mortgages against the collateral property does not exceed 100% of the fair market value (FMV) of the property.

So as I said, HELOC interest is deductible based on the amount of outstanding loan, not what its used for.

shannahan · Mar 13, 2009, 12:47 PM

Thank you.

IntlTax · Mar 14, 2009, 06:14 AM

Agree with ScottGem.

Marie4454 · Mar 14, 2009, 11:32 AM

Thanks. Makes sense.