Thank you for your reply. In regard to the exception I mentioned ("Choice to treat the debt as not secured by your home. You can choose to treat any debt secured by your qualified home as not secured by the home" (IRS Publication 936)), are you sure the exception only qualifies when the money is used for a business? The reason I ask is because in IRS Publication 936 I read the following:
Mortgage proceeds used for business or investment. If your home mortgage interest deduction is limited under the rules explained in Part II, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities. The Table 1 Instructions for line 16 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used.
Which I interpret to mean that there exist more ways to qualify for the exception besides strictly "business."
If I'm not taking that portion of the publication out of context, then wouldn't a private loan I make using my HELOC money count as an investment for which I can deduct the HELOC interest? As in the following example, found on the webpage I referenced in my OP:
For example, you take $100k out of your HELOC with a 5% interest rate and provide a hard-money to another investor at 10%. Assuming you don't have any other investment expenses, the $5,000 in interest from your HELOC will be tax deductible because it is less than your $10,000 in investment income.
