home line of credit - interest deduction

"My interest" wrote

I see it as some form of a re-fi. As long as nothing is being used for other purposes, like a vacation, car, boat.....then deduct away.

"My interest" wrote

answers your question and with IRS references.

If I keep the bank record which shows the exact amount (e.g. $200K) being taken out from home equity account is transferred to the mortgage account. Is it a good enough evidence to show the money is indeed not used for other purpose?

Thanks. Are you referring to the point 3.6 on the IRS website? I think my question, putting another way, is whether "paying down mortgage" can be classified as "buy, build, or substantially improve your home"?

"My interest" wrote

Yes, I am looking at point 3.6. I suggest reading all of it. For HELs, it refers the reader to

. Both of these note that there may be a limit to how much of the HEL's interest you may deduct. They explain the limit. My impression is that it does not matter what you use the HEL for. The bigger issue for you may be the limit I mention above.

Elle's link was good, that refers you then to pub 936. See page 8, middle column, "refinanced home acquisition debt"

"Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later)."

I'm pretty certain this covers you. But to your point, keep a paper trail. Very simple to show a mortgage balance of $200K one day, and the other loan of $200K the next.

Joe

Please don't post the same question to multiple groups.

Well, I want to lower my cost but I don't think I am trying to be sneaky. The bank is not really passing through the benefit of lower interest rates to us as consumers. Given the 3% cut in FedFund rate, how much % mortgage rate has been cut? (Well, banks will always give you some "reasonable" technical explainations and I know what they will say - I am working in the financial industry myself).

Actually I am not sure why you say it may violate the terms of my credit line. When I applied the credit line, one question on the application form was "do you intend to pay down / off your current mortgage". To me, this implies paying down mortgage is one of the possible/valid reasons to apply the credit line.

This is indeed the reason for my original question. I am using the line of credit to pay down my mortgage (i.e not playing tricks to pay for things like vacations etc). None of the IRS FAQ I found covers exactly my case. I would guess the closet example is either a refinance (can my case be treated as partially refinance by a line of credit) or may be an acquisition cost (what IRS will think if I used the line of credit to buy another house? If it has no problem with that, why do you think it should bark if I use the money to "pay" for my current house?)

Thanks.