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This Loan and Credit Line Tax Savings Calculator will determine your potential tax savings on home equity loans or lines of credit with tax-deductible interest. Most borrowers are aware that interest paid on home equity debt is tax-deductible, but figuring what their tax savings will be can be a challenge. This calculator is designed to do that for you.
Generally, the interest paid on a home equity loan or home equity line of credit (HELOC) is tax-deductible for borrowers who itemize deductions. Single borrowers may deduct the interest paid on up to $50,000 in home equity debt, exclusive of their primary mortgage, while couples filing jointly can deduct interest paid on up to $100,000 in home equity debt. Other rules may apply, so you should consult your tax advisor to determine what guidelines apply to your specific tax situation as it relates to loans and credit lines.
More detailed explanations of the tax deductibility guidelines for home equity loans and HELOCs are provided at the bottom of the page, which may help clarify things for you. If you're not sure if you're eligible, check the explanations in the last two sections on this page.
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Interest paid on home equity loans and lines of credit totalling $100,000 or less that were taken out after October 13, 1987 is usually tax-deductible for couples filing jointly. For single filers or married persons filing separate returns, the maximum threshold goes down to $50,000. Either way, the amount must not exceed the fair market value of the property, minus the grandfathered debt and home acquisition debt.
Grandfathered debt is simply the term commonly used to describe mortgages taken out before October 13, 1987. Home acquisition debt includes mortgages taken out after this date for the purpose of buying, building or improving a property. The maximum threshold for home acquisition debt to be tax deductible is $1 million, or $500,000 if you are single or married filing separately.