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dazimi123
New Member

Can the HELOC loan on the rental property be deducted from the capital gain? I am going to sell a rental property which was not a primary resident in the past 5 years.

Can the HELOC loan on the rental property be deducted from the capital gain? I am selling a rental property which was not a primary resident in the past 5 years.

1 Reply
DanielV01
Employee Tax Expert

Can the HELOC loan on the rental property be deducted from the capital gain? I am going to sell a rental property which was not a primary resident in the past 5 years.

No, it cannot be directly deducted.  The HELOC is similar to a mortgage, and can actually be reported as such with tax documentation.  Thus, if you took out the HELOC and were making payments on it while you were renting it at the same time, you are allowed to deduct the interest payments as expenses against the rental income.  If you have not done this in the past, you may amend your returns back to 2013 and receive additional refunds for them.  And, when you settle the line of credit with the sale of the house, any expenses related to the repayment of the loan would be included in the basis of the home, which would reduce the capital gain.  You will also claim any other seller-paid costs as closing to increase the basis on the home, which reduces the capital gain.  Here is an FAQ which discusses in greater detail a rental home sale:  https://ttlc.intuit.com/replies/3388350

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