Are points and fees for a home equity home deductible?

[Vanessa · Accepted solution]

Maybe and no.  The fees for the home equity loan are not deductible.  IF you used the loan to buy, build or substantially improve the home, then the fees can be added to the cost basis of your home and then when you sell the home, this will decrease your profit on the sale.

 If you used the entire home equity loan to buy, build or substantially improve your home, then yes, you can deduct the points, but not all at once usually.  Points generally need to be amortized over the life of the loan since it is considered prepaid interest. 

If the home equity loan was not used to buy, build or substantially improve the home the loan is secured by, then no part of the points are deductible.  If a portion was, then the points would need to be prorated and amortized.