Can I take out an equity loan on my house, give the entire amount to chariy, and write that amount off?

Question

Can I take out an equity loan on my house, give the entire amount to chariy, and write that amount off?

Answer 1

You can only write off charitable deductions to the extent of your income.

But, why would you do this?  You still owe the loan, the write off only decreases your taxable income by about 30% and you're about to be homeless.

Answer 2

Sort of.  You can normally deduct  up to half of your AGI as charitable contributions.

But you do realize that your tax doesn't go down by the amount of the contribution? Your tax savings is up to the amount of the contribution times your tax bracket.  So if you donate $10,000 to a recognized charity and are in a 15% tax bracket, your tax savings would be up to $1500, the rest of the donation comes out of your pocket.

Answer 3

YES you can.  Would it be wise to do so? NO, certainly not as a tax savings measure.  You likely would pay more interest on the loan than any tax savings that would result.

Answer 4

If you are a first time borrower of a home equity loan it is imperative that you have a checklist of essential questions that you need to ask each and every lender. The answers to these questions will provide a valuable reference to base your comparisons on. What’s the interest rate? Knowing this is crucial. The interest rate will determine<!--the monthly payment you will need to make. You also need to know if the interest rate is of a fixed or adjustable nature. Fixed rate implies that the monthly payments will remain constant, while an adjustable rate implies that rates will fluctuate depending on market conditions.

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In adjustable rate, when will rates change? If your interest rate on the home equity loan is of the adjustable variety, you need to know three things: when the rate is going to change (that is under what conditions), how frequently will the rate change and what’s the average-->percentage by which the adjustable rate will change. What is the Annual Percentage Rate or APR? The APR on the home equity loan will determine the yearly payment you will need to make towards this.The higher the payment in terms of points, the lower is the interest rate.

Answer 5

you would only get a tax credit for your tax bracket times the amount of the donation, so if you borrow 10,000 and donate it and are in the 25% tax bracket, you will only save $2500 and will have to pay back 10000 + interest