Level 1
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Investors & landlords

We took out a HELOC against our rental property to help pay for improvements on our primary residence. Do I apply the interest deduction to the rental property or our primary residence? 

Level 12
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Investors & landlords

If the loan is secured by your rental property, the mortgage interest is reported as a Rental Expense.

Note that if any portion of the loan proceeds are used for something other than the rental property, the portion of interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Chapter 4 of Pub. 535 explains mortgage interest in detail: https://www.irs.gov/publications/p527/ch01.html

Level 1
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Investors & landlords

To Clarify....HELOC taken on rental property that is used as down payment for primary residence is deducted as interest on taxpayer's schedule A for primary residence and NOT as a rental expense?
Level 12
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Investors & landlords

@robert Yes, if the proceeds of the HELOC are used for a primary residence, the interest would NOT be a rental expense. Instead, report the HELOC interest on Schedule A (mortgage interest).
Level 1
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Investors & landlords

How about if I tool a HELO on my house to buy rental property?
Level 6
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Investors & landlords

The interest can't be deducted on Sch A if it isn't secured by the primary residence.  

Level 6
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Investors & landlords

It's not deductible on E but could be taken as investment interest on A but not deductible for your primary residence because the interest isn't secured by your primary residence.  

 

 

Level 3
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Investors & landlords

Can I deduct interest on a Sch E (Rental Property) if I used my PRIMARY RESIDENCE ELOC to purchase the rental property?

The ELOC would be used exclusively for the rental property.

 

Level 3
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Investors & landlords

I cant seem to find a concrete answer to this question:

I have an ELOC on my primary residence.

I want to use that ELOC to buy a rental property. That ELOC would be exclusively used for that purpose and not used for anything else.

CAN I DEDUCT THE INTEREST ON SCHEDULE E?

Level 20
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Investors & landlords

Tracing rules apply if you get a HELOC on the primary residence and use it on the Sch E ...

https://www.cbiz.com/insights-resources/details/articleid/6339/ispreview/true/deducting-interest-on-...