Yes. Your interest deduction on your home equity line of credit is limited. This means that your total itemized deductions will be less. For tax purposes, only the balance of the loan that is the smaller of $100,000 or your equity in the home qualifies for the interest deduction. Your equity is equal to the amount you could sell the home for minus the amount you still owe on the mortgage.
If your total itemized deductions are greater than the standard deduction, you will still take the itemized deductions. The limitation on your home equity loan does not affect the calculation of the other categories of itemized deductions.
Itemized deductions are used to lower your taxable income only after the total of your itemized deductions is more than the standard deduction.
The standard deduction is the amount the IRS allows everyone to deduct from their income, so that everyone has at least some income that is not subject to income tax. The amount of the standard deduction depends on what filing status you use.
For 2016 the standard deduction amounts are:
Single 6,300 + 1,550 for 65 and over
HOH 9,300 + 1,550 for 65 and over
Joint 12,600 + 1,250 for each 65 and over
Married filing Separate 6,300 + 1,250 for 65 and over
What this means is, for example, a single person must have more than $6,300 in itemized deductions before they will see a reduction in their taxes for using itemized deductions.
