Need a Tax Write-off? Consolidate Your Debt with a Home Equity Loan and You Can Write off Your Interest This Year!

By Sheryl Landrum
LoanPage.com Columnist

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Credit card interest is usually a non-deductible interest expense. But, guess what? Your mortgage interest is often a tax deductible item. Find out how you can reduce your credit card debt by consolidating it through a home equity loan or line of credit and also gain valuable tax deductions. You can even improve your credit scores and lower your interest rates, saving you thousands of dollars.

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Yes, consolidating debt with a home loan can save you money on your taxes. Here's how:
  • Mortgage interest is usually our biggest tax deduction when we file our annual tax returns. Consolidating non-tax deductible interest on credit cards into a home equity line of credit or a home equity loan can help you reduce your annual tax bill if you file a Schedule A. Also, there are limits on amounts and loan to values that affect deductibility of interest. Check with your finance professional before committing to your home equity loan.
  • Having a lot of credit card debt can lower your credit scores especially when your debt is over 25-50% to your available credit. By paying off credit card debt through a home equity loan or line of credit you can increase your available credit and actually raise your credit scores. Keep the ones with the longest and best payment history; if you have a lot of cards you may want to close some of them to raise your scores further.
  • Credit card interest is usually higher than the interest charged on a home equity line of credit or a home equity loan. Not only can you get a tax deduction when you consolidate your credit card through a home equity mortgage product, you'll usually drop your interest rate significantly as well.
If you are struggling with debt and have equity in your home, do some checking to see if a home equity line of credit or a fixed rate home equity loan may help you consolidate your debt into a single, tax deductible bill.

About the Author
Sheryl Landrum is a Loan Officer with First Capital Mortgage of San Diego, California and a freelance writer specializing in mortgage issues.

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