How to pro-rate home equity interest deduction

Here is the situation: Home equity line is for $350,000. During the course of the tax year, the amount borrowed on the line varied from $0 to $300,000 (basically increasing as the year went on during the course of a remodel). The entire amount is attributable to home remodel. I know that the maximum amount of $100,000 applies to this line, but I'm having trouble figuring out how to prorate the yearly interest based on this. I mean, if it was a fixed loan for $300,000 I would just divide the yearly interest by 3, but here we have a situation where the amount borrowed actually varied throughout the year. How exactly am I supposed to prorate it? Should I just take the average of the starting and ending amounts of the line (0 and $300,000) and divide by 2 to estimate the average balance for the year, or do I need to go in by monthly statements (none of which I still have)?
Thanks in advance
Reply to
Actor123
In article ,
Back to basics:
A mortgage is a loan secured by your home.
Mortgage principal used to buy, build or improve your home is Home Acquisition Debt.
Mortgage Principal used for other purposes is Home Equity Debt.
So in spite of having obtained what the bank called a Home Equity LOC or loan, since you say you used the proceeds to remodel your home, which I assume means a capital improvement, not a simple paint job, it is home acquisition debt, subject to the $1 million of principal rule.
Reply to
Arthur Kamlet
In addition to Art Kamlet's reply, see also recent thread "Mortgage Interest deduction limit for HELOC".
IRS Pub 936 gives detailed instructions and "Table 1. Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year", but you need to be a competent spreadsheet jockey with excellent historical records and a fair amount of time on your hands to do it correctly, IMO.
-Mark Bole
Reply to
Mark Bole
Whoops, forgot to mention that there is a separate 1st mortgage on the home for $1 million, so only $100K of the heloc is deductable even if considered home acquisition debt.
Reply to
Actor123

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