@John F wrote:
You wrote: In your case, all your borrowings on the HELOC were used to acquire rental property. Therefore, the interest paid on the debt could be considered passive activity interest … If treated as passive activity debt, the interest is deductible against the rental income produced by the acquired property.
I clicked on your provided link and researched this matter in the IRS Publication 936, “Home Mortgage Interest Deduction.” On the front cover and in numerous other places in the official IRS publication it clearly states any HELOC interest expense paid on items not to “buy, build, or substantially improve your home” meaning your primary residence – this interest is no longer deductible for tax years 2018 and forward.
As a CPA, I respectfully disagree to your advice on deducting HELOC interest expense against rental income (or deducting anywhere else on a return) if the purpose of the HELOC debt was not for the “buying, building, or improving” of your primary residence.
The IRS text says:
deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan
How can this be interpreted in terms of BUY? How can you buy the home that is used to secure the loan? Can you buy another home?
