Home Equity Lines of Credit

A home equity line of credit is a loan against the equity in your home that allows you to borrow and repay the loan as often as needed. An equity line is used to: 1) Create reserve funds available for such purposes as paying bills after a job loss, auto purchase, college, etc. 2) Bridge short-term cash needs. 3) Payoff or avoid incurring nondeductible consumer interest (auto loans, credit cards, etc.) Interest on home equity debt used for any purpose is deductible on balances up to the lesser of $100,000 or the fair market value of the home, less total acquisition debt. Interest on home acquisition debt is deductible on balances up to $1,000,000, however, if home acquisition debt exceeds $1,000,000, then up to $100,000 of it can be deemed home equity debt increasing the total debt ceiling for the home mortgage interest deduction to $1.1 million. For AMT purposes, home equity debt is not deductible.