Tax Year Prior to 2020: If I have a home equity line of credit secured by my main home and I use all the proceeds to build my second home, is the interest fully deductible?

[stevenggray]

According to pub 436, if proceeds from a home equity loan are used to build or improve your main home or second home, the interest is fully deductible if the loan is secured by the home being built or improved.  However, if the loan is secured by the main home but used to build the second home, is the interest now subject to the limitations described in 936?

[KarenL2]

Yes, it is still fully deductible in your situation.  Additionally, the interest on up to $100,000 borrowed on a home equity loan or home equity line of credit, regardless of the reason for the loan, can also be deducted in the Mortgage Interest section (Home Loan Deduction).

To get to that area in TurboTax:  While inside the software and working on your return, type home equity loan in the Search at the top of the screen (you may see a magnifying glass there).  There will be a popup that says Jump to home equity loan.  Select that to get to the general area. 

Alternatively, you can go to:

• Federal Taxes tab (Person in the Home & Business version)
• Deductions and Credits
• Your Home
• Mortgage Interest and Refinancing and Property Taxes