Can we deduct the interest on an equity loan of our rental home on our main home improvements?

[abos_mom]

The RV was purchased with a home equity loan a few years ago. We took out an equity loan on our rental home for use to build a garage at our main home. Can we deduct the rental home interest and where?

[view2 · Accepted solution]

No,Unless you use the proceeds for improving the rental property, or purchasing another rental property, you may  be losing a deduction. For example,, If you mortgage your rental property and use the proceeds to buy a \personal residence, NONE of the INTEREST you pay will be deductible.

If you purchase personal use assets, such as a car or boat, or use the proceeds to payoff a credit card, NONE of the interest is deductible.

When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Chapter 4 of Pub. 535 explains mortgage interest in detail. 

https://taxmap.ntis.gov/taxmap/pubs/p527-002.htm#TXMP0c5b820b