Is a home improvement loan on a second home tax deductible?

Primarily, this means that the total debt cannot be more than the value of the home. But, you can deduct interest on the amount of debt up to the home's value. When a homeowner takes out an equity loan that, when combined with his first mortgage amount, increases the debt on the house to an amount more than the property's actual value, the homeowner faces additional deductibility limits.

In these cases, the IRS says you can deduct the smaller of interest on a $100,000 loan or your home's value less the amount of your existing mortgage. However, you're not going to get to deduct all that interest. Instead, your deduction is limited to interest on just $15,000 of the loan; that's the amount your home's value exceeds your first mortgage.

Interest payments on the other $27,500 are not deductible, even though the equity line is secured by your home. So don't automatically assume you can deduct all interest on home equity debts. One other limitation on a second home is if you rent it out.

See below:What if your real estate circumstances are a bit brighter? Say, for instance, you're able to swing a vacation home on the lake. You're in tax luck.

Mortgage interest on second homes is fully deductible. In fact, your additional property doesn't have to strictly be a house. It could be a boat or RV, as long as it has cooking, sleeping and bathroom facilities.

You can even rent out your second property for part of the year and still take full advantage of the mortgage interest deduction as long as you also spend some time there. But be careful. If you don't vacation at least 14 days at your second property, or more than 10 percent of the number of days that you do rent it out (whichever is longer), the IRS could consider the place a residential rental property and axe your interest deduction.