Home, Sweet Tax Break

If the excess is used for anything other than refurbishing your home -- such as paying off your credit cards or financing your children's education -- then the excess is considered a home equity loan. If the excess plus all other home equity loans does not exceed $100,000, then the interest is fully deductible. If the excess is used for investment or business purposes, though, then that part of the loan is classified as such.

Points. Points, an upfront fee charged by many lenders, are generally deductible. (One point equals 1% of the loan amount.) Points that are considered a form of prepaid interest are deductible; points that are for specific lender services are not.

Points are generally deductible over the term of the loan, with one important exception -- points paid on an acquisition loan for your principal residence are deductible in the year they are paid. The points must be specifically labeled on the loan closing statement as "points," "loan origination fees" or "loan discount," and can't exceed the points generally charged in the geographic area.

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