topic Re: interest expense in Investors & landlords

Tax Year Prior to 2020: interest expense

Sue53 — Mon, 22 May 2023 20:05:53 GMT

I borrow money from my heloc to invest in a friend's flip. So I paid the interest on a monthly basis on my heloc in 2019 and 2020. I won't get the income until 2020.

Qn1) Where should I be claiming this transaction? business activities or interest and carrying charges?

Qn2) Can I accrue the interest I paid and claim it all in the year I receive the income? Or do I HAVE TO claim the interest paid on the heloc in 2019 and then the interest paid on the heloc in 2020? I don't have income room in 2019 so the claim of interest paid doesn't help me with taxes but would in 2020.

Re: interest expense

DianeC958 — Mon, 30 Mar 2020 17:53:13 GMT

Since the money you borrowed from the HELOC was put into an investment, the interest you paid is not deductible for 2019. If you receive a return on the investment in 2020, then you report the interest paid as part of your basis in the investment.

What Are Deductible Investment Interest Expenses?

@Sue53

Re: interest expense

Sue53 — Mon, 30 Mar 2020 17:59:11 GMT

Is this a Canada site?

Re: interest expense

VictorW9 — Mon, 30 Mar 2020 18:05:58 GMT

No it is not! However, some of the issues discussed in this site can still be helpful even if you live in Canada.