Many people take out home equity loans to consolidate debts, make improvements to their home, or purchase a second home. The interest on most home equity loans is tax deductible.
There are limitations to interest deductions for home equity loans depending on what the loan is used for. If you are consolidating your debts, you can deduct the interest on the first $100,000. The limits are higher (up to the value of the home or more) if you took the loan out to buy a second home or to improve your home. If you are able to deduct your home equity loan interest, add that amount to your Schedule A.
For more information about home equity loan tax deductions, see IRS Publication 936, Home Mortgage Interest Deduction