| Home equity loans (second mortgages) and equity | | | | usually fully deductible on:o Up to $1 million (up to |
| lines of credit (HELOCs) are popular ways for | | | | $500,000 if married filing separately) in mortgage debt |
| homeowners to consolidate debts or to make home | | | | (acquisition debt).o Mortgages secured by your primary |
| improvements on their primary residences, especially if | | | | residence or second home.o Mortgages used to buy, |
| they don't want to refinance because their first | | | | build, or improve your primary residence or second |
| mortgage rates are low. Mortgage refinancing can also | | | | home.o Home equity loans and lines of credit, if total |
| be expensive, making second mortgages and home | | | | amount of home equity debt on your main and second |
| equity lines much more attractive options. | | | | homes does not exceed $100,000 ($50,000 for |
| Second mortgages are also popular as "piggy back" | | | | married filing separately) and the total outstanding |
| loans to help finance down payments if the | | | | mortgages against the collateral property does not |
| home-buyer doesn't have a lot of cash on hand, and | | | | exceed 100% of the fair market value (FMV) of the |
| for purchasing a second home. Many people are | | | | property. |
| drawn to the tax advantages that second mortgages | | | | IRS Publication 936 states that interest on amounts |
| and HELOCs offer, especially since many states allow | | | | over the home equity debt limit generally is treated as |
| a 100% deduction on the interest paid on mortgage | | | | personal interest and is not deductible. But if the |
| loans. However, there are certain limitations to second | | | | proceeds of the loan were used for investment, |
| mortgage and HELOC tax deductibility. | | | | business, or other deductible purposes, the interest |
| According to Wells Fargo Bank, interest payments are | | | | may be deductible. |