Question: During 2020, Nate took out a home equity loan on his primary residence for $248,000 to purchase a second home. The loan is secured by his primary residence. Can Nate deduct the interest as qualified mortgage interest?
Answer: No, Nate would have to take out the loan to purchase the second home and have the loan secured by the second home to deduct it as qualified mortgage interest.
In this case, the home equity loan interest is not deductible regardless of its use. Regardless of when the indebtedness was incurred, you can only deduct the interest from a loan secured by your home to the extent the loan proceeds were used to buy, build or substantially improve your home.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.