Refinanced home equity loan but lender put $10k in our savings, unused this year

[User-at-netscape]

We refinanced a home equity line-of-credit loan but the lender put $10k in our savings account that we didn't need yet.  The $10,000 was not used during the remainder of the year and paid back in full the next year.  How do we report how the money was used when we didn't use it?

[Vanessa A]

Since the $10,000 was a cash out, it would be reported as cash.  The fact that it sat in your savings account and you paid interest on it makes it a non deductible part of the HELOC.  So if your loan was for $100,000 and $90,000 was used to buy, build or improve your home, then you would be able to deduct 90% of the interest on that loan.  You would not be able to deduct the other 10% as it does not meet the buy, build or improve requirements.