@gauldsg04 wrote:
The rule also says, the loan must be secured by the SAME property that the proceeds are used to construct. The HELOC is secured by home A and the proceeds were used to buy and substantially modify Home B. So, with the rule above, the answer would need to be no since the proceeds were not used to buy and modify the home that was used to secure the loan. So, unless I am missing something, and every tax expert I have asked and website I have checked all agree with my understanding, the interest is not tax deducible. The Tax expert at Turbo Tax I spoke with today told me that since I did not use any proceeds on the home used to secure the loan, I can simply act as if I never had the loan in the first place (do not include its 1098 in my filing).
You need to answer that the loan was used for "something else." Do not answer that it was used to buy or build your main home (since it was not secured by the home that was built.)
The support rep was also correct that, if you know for sure that the interest is not deductible, you can simply ignore it and not enter it on your return.
