I took out a HELOC on my main house A in mid 2018 to help purchase a rental property B across the street (in addition to mortgage on that rental property). I renovated the rental house B in 2018/2019 and started renting in mid 2019. For 2019, I can deduct the mortgage for B as rental expense. I was curious about the HELOC on A used 100% (paper trail exists) to purchase B. I did not deduct the interest on the HELOC on A in 2018 as neither the rental was ready for move-in nor would my main house qualify (mortgage is above 1M).
I contacted a tax professional that confirmed that I can indeed deduct the HELOC interest for the rental property B. He advised that I should "make an election to transfer heloc interest to the rental expenses" confirming that I should make "a formal election" vs. simply allocating the HELOC interest on Schedule E for B. I am a bit stumped on how to do such a "formal election" in TurboTax.
Any advice is appreciated!