Here's how you calculate home equity loan deduction

This is a query that most people have: how do you calculate the percentage of interest that is tax deductible on your home equity loan. Well let’s give you a lowdown on how exactly you cold do it. First a little information – there are quite a few variables that you must consider while calculating the proper amount of deductible interest on mortgage or home-equity loans. These variables include your filing status, the fair-market value of your home, origination dates of previous mortgages and remaining debt.

One of the first things you will need to do is get the IRS Publication 936, Home Mortgage Interest Deductions. This book will give you a thorough explanation of how such calculations are made. It also includes a flowchart to help determine if all or part of your mortgage or equity interest is deductible. You can either pick up a copy of the book or download one.