Reply #4: Home equity lines

[Sgent]

are often treated differently -- falling into, as you noted, lines which merely put your home at risk in a forclosure, and those used to improve the residence.

In this particular case, depending on how the loan and payment to the ex was structured, it will change how the loan is treated.

If he went down to the bank, took out the loan and deposited the proceeds in his checking account, then wrote a check out to ex (or any other similar situation), then he needs to get an accountant to look at the actual loan documents.

If he purchased his wife's interest in the house using a home equity line -- and all proceeds went directly to wife w/o him having control, then it is treated the same as him having bought a 1/2 interest in the house (fully deductible). To effect that, there should be a contract with the ex, or court documents, that require him to pay the wife for 1/2 the value of the house, then valuing the house at $X, and an equity line payment directly to ex of $X/2 made directly to wife from bank or escrow company, as well as a corresponding change in title.