Is it possible to deduct the interest on a home improvement loan that was used to add capital improvements to the home?

[IreneS]

Yes - It is deductible as home mortgage interest, as long as the debt is secured by the home.

Home equity debt is limited to the lesser of:

• fair market value of the home minus total acquisition debt; or
• $100,000
  

To enter interest on the home improvement loan, please follow these steps:

1. Click on Federal Taxes > Deductions & Credits.
2. In the Your Home section, click on the Start/Revisit box next to Mortgage Interest, Refinancing, and Insurance.  [See Screenshot #1, below.]
3. If you haven't entered any mortgage information yet, just proceed through the screens, entering the requested information on your first mortgage.  When finished, you will be brought to the Mortgage Deduction summary screen.
4. If you've already entered information on one loan, you will be brought to the Mortgage deduction summary screen.  Click the Add a Lender box on the Mortgage deduction summary screen. [Screenshot #2]
5. Proceed through the screens, entering the requested information.
6. Your will be brought back to the Mortgage deduction summary again.  You can click on the Add a Lender box as many times as you need to enter your loans.