Interest on "qualified home equity debt"is deductible. I.R.C. [sec] 163(h)(1), (3)(A). To be "qualified home equity debt", the debt must be secured by a qualified residence of the taxpayer and not exceed the home's value. I.R.C. [sec] 163(h)(3)(C). A qualified residence includes the taxpayer's principal residence and one other residence, such as a vacation home used for more than 14 days or 10 percent of the time that the home is rented out, whichever is greater. I.R.C. [sec] 163(h)(4)(A)(i). Total home equity debt may not exceed $100,000 ($50,000 if married filing separately). I.R.C. [sec] 163(h)(3)(C).
If a home equity loan exceeds the above limits, then the interest allocable to the excess debt will follow the "interest tracing rules." Under these rules, whether the interest (related to the excess debt) will be deductible will depend on the use of the proceeds - whether for personal expenditures, such as to pay off credit cards, or for investment purposes, or for a business.take home equity loan of upto $100,000. I would suggest you to refinance the mortgage loan secured by your house and pay off the home equity loan and house upgrade expenses.
And than use the home equity loan to pay for the insurance premiums.
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