When or is the interest on a home equity line of credit deductible?
I am not a CPA, but as far as I know, you can deduct the interest on up to $100,000 of the amount borrowed on a primary residence home equity loan.
I am not an IRS agent. But here is what others have to say:
Home mortgage interest is deductible as an itemized deduction depending on various thresholds and whether it is to purchase or cash out on a refinance.
First home mortgage debt incurred to purchase a primary and second residence is deductible, provided the total acquisition debt is less than $1 million. In your case, you borrowed $99,000 or less. You would still have the ability to borrow and deduct the interest on another $901,000 in debt if you acquire a second residence.
When you refinance acquisition debt or take out additional debt such as a HELOC, you can deduct the interest on such debt if you use it to improve your residence and on up to an additional $100,000 that you can use for any purpose, except for the purchase of tax-exempt securities such as municipal bonds. If you use the $100,000 to buy a second home, then it gets thrown back into the $1 million pot.
In your case, you already borrowed $100,000 but did not state what it was for. If you used the $100,000 to purchase investments, you can claim the interest on the mortgage as either home mortgage interest or investment interest.
If you use it to take an around-the-world trip, then you can claim it only as mortgage interest.
Interest on borrowings in excess of the $100,000 would not be deductible unless it’s for business or investment purposes, which would not be the case if you borrowed to purchase a new auto, unless some of the prior $100,000 was for improvements or investments.
For example if you used $20,000 of the prior $100,000 to make improvements to the condo, then you could borrow up to an additional $20,000 to purchase the car and claim the interest as mortgage interest.