Question

Deduction on Home Equity Loan

Forum|Forum|3 years ago
January 28, 2023
1 reply
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I took out a home equity loan in 2019 for which I have not claimed the interest on my taxes in 2019, 2020, or 2021 because it was better for me in those years to claim the standard deduction. I spent most of the money for upgrades on my house in 2019 but it took me until 2021 to finish a couple small projects to complete the spending of the home equity loan for home improvements. I would like to deduct the interest paid for 2022 for the home equity loan because I had a lot of health costs in 2022 which make it better for me to itemize my deductions. Can I deduct the entire amount of the interest that I paid for the home equity loan since I have spent the balance that is on my loan for home improvements even though it took me until 2021 to complete all of them or can I only deduct the amount that I spent up to 2019? My question is really that in order to deduct interest on a home equity loan is there a time period that you have to complete the spending for home improvements?

M

Mike9241

a home equity loan used to substantially improve your first or second home is typically deductible. the loan must be secured by the taxpayer's home and not exceed the cost of the home when combined with other acquisition indebtedness and is subject to the overall limitation on acquisition indebtedness. the issue you may face is tracing the loan proceeds to payments for the construction costs. if proceeds were used to pay medical or other personal costs that portion would not be deductible.