Deductibility of interest on Primary Residence HELOC when used for purchase of an investment property which will have taxable income

[mpsingh08]

I would like to use the HELOC on my primary residence to purchase an investment property. I will have taxable income in the investment property. I think, under the interest tracing rule, I would be allowed to deduct the HELOC interest on Schedule E for that investment property. Am I correct in my understanding? I will appreciate your comment.

[MarilynG1 · Accepted solution]

Yes, if you used your HELOC to purchase Rental Property, you can deduct the full amount of Mortgage Interest as a Rental Expense on Schedule E.

Don't include that mortgage interest on Schedule A as an Itemized Deduction, in that case.

Click this link for more info on Using HELOC to Purchase Rental Property. 

[mpsingh08]

Hi Marilyn,

Thanks for such a prompt response and very clear guidance.

I noted you are an "Employee Tax Expert". Does that mean you are an employee of Intuit/TurboTax? Just curious.

Kind regards,

Mahendra Singh

[PattiF]

Yes, Marilyn is an employee of Intuit/TurboTax.