I have a Home Equity Line of Credit secured by my primary home / mortgage in MD. I used $6000 of it to pay for repairs and improvements on a rental property I own in OH. The rental property is rented to a tenant. Am I allowed to deduct the interest on the money I borrowed?
No, you can only deduct the interest that was used to buy, build or substantially improve the home the mortgage is secured by.
I believe there are exceptions and that you can still allocate interest paid on expenditures to your rental property even if the loan was secured by your primary residence. I don’t think the answer that was given above researched the interest tracing rules or if the interest paid was used in a trade or business or to generate income .... as rental property is used to generate income. I was under the same impression at first but the more I researched various articles and consulted a CPA we both feel you can still allocate interest paid to an income producing property even if was secured on your primary residence.