[clekr]

Gonzy pretty much has it. Though as everything with our wonderful system it is not always that simple.

You may deduct the interest on the home equity debt if the amount of the loan is the smaller of:

1. $100,000, or

2. the homes FMV (at the time the acquisition debt was incurred) less amount of the acquisition debt.


So if you bought the house for $100,000 and immediately borrowed $75,000 against, you could not deduct the interest on the new home equity loan if the amount of the loan is greater than $25,000.

Of course, as with all the stuff passed by those with infinite wisdom up on The Hill, there are a myriad of nuances. I have neither the space or the patience to go there.