What is the typical maximum tax-deductible limit on interest paid for a home equity loan?

The typical maximum tax-deductible limit on interest paid for a home equity loan is up to $100,000. This limit applies to the interest on a home equity loan or line of credit, allowing taxpayers to deduct the interest paid on the loan from their taxable income, provided the loan is used to buy, build, or substantially improve the home that secures the loan.

This deduction limit is important because it provides a financial incentive for homeowners to use home equity loans in ways that enhance the value of their property, like renovations or expansions. By maintaining this threshold, the tax code helps ensure that homeowners can benefit from the lower interest rates associated with home equity loans without overly complicating the tax benefits.

The alternative choices may lead to misinterpretations regarding limits that do not reflect the current tax code and its application to home equity loans.