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Hello and thank you for using Just Answer,If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. There is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your main home and second home is limited to the smaller of:
$100,000 ($50,000 if married filing separately), or
The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt
You would have to look to any other mortgage you had on your home.
If you did not have any then you may be allowed to use the interest you paid on the equity line of credit.
If you already had to pay back the interest on the Equity line of credit but did not claim the interest in the year you paid because your debt was already over the limit then you would not be able to claim it now either unfortunately.
Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible.
Did you claim the interest you paid on the equity line in past years on your Schedule A?
The system said you were typing but no post is showing.
No we have not claimed the interest. But I am just checking the 2011 return to make sure.
If you did not and you are not limited because of any other mortgages then you could amend your past returns (3 years0 and claim the interest.
The house is worth way more, so I gues sthe answer to the first question would be 100,000
It looks as though you will not be allowed to claim the expense. Did you have a binding loan agreement that stated this was a loan?
The interest of the first mortgage is claimed in the Schedule E ( we have rented the home). However we did not claim any interest of the second mortgage.
Yes we have a loan agreement.
If you used rental property to secure the loan I will need to check to see if that would fall under business use (I am thinking no but need to check)
You may be able to look to investment expense. The interest though would be for the year you paid it so that would require amending then carrying forward till you have investment income (the interest they pay you).
You could not use the investment expense unless you incurred it in the same year they pay but the amending would carry it to the year they pay you the interest and then you would be showing the income so your expense would count.
Thank you. We have not filed 2012 yet. So we could amend 2010 & 2011.
You would need to amend both of those.
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Can we use the gift excemption for the remainder of the interest ?
Only if you are going to gift them the total amount. The gift will not assist you though (you cannot deduct it). You would not have to pay tax on the amount you gift them form this loan and you should have mad ethe gift in the year you gave them the money really (filing the 709 then).
O.K. thank you.
Your positive rating is always thanks enough.