There are some special tax rules with regard to what costs can be deducted in connection with an equity loan or credit line. Let's see what tax breaks you'll get from Uncle Sam.
If you borrow against the equity in your home to make major capital improvements to the home, the interest on up $750,000 of mortgage debt plus up to $100,000 of home equity debt is tax-deductible.
IMPORTANT NOTE: If you are married and filing separately, the mortgage deduction limit is reduced to $375,000.
There are three different ways that the IRS treats home equity points.
This information should serve as a guide for you—to give you an idea of what's tax-deductible and what's not. You should call your tax professional to clarify anything you don't understand and to verify that the information is still valid under current law. Keep in mind that tax laws are always subject to change, and that the information provided here could change at any time.