Deducting HELOC interest after the fact

[BraunLA1]

Hi - I renovated my pool two years ago for $50k.  Now I want to use that cash for an outside investment.  Can I take out a HELOC or Home Equity loan for $50k now and deduct the interest as home improvement expense?  I did spend $50k on improving the property, there is just a timing difference.

Thanks!

[Mike9241 · Accepted solution]

by your own statement, the HELOC was not taken out to improve the home. it was taken out later. it would not qualify for the mortgage interest deduction. using the IRS tracing rules it would qualify as investment interest expense but that's only deductible to the extent of investment income. short-term capital gains, interest, nonqualifying dividends, net royalties.  you can elect to apply long-term capital gains and qualifying dividends to offset the investment interest but then you lose the preferred rate on them