Is a HELOC on primary residence tax deductible?

Forum|Forum|6 years ago
June 4, 2019
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Best answer by Texas Roger

Interest on home equity loans or lines of credit are still deductible, but only if the loan is used to buy, build, or substantially improve the home and the total mortgage doesn’t exceed $750,000.

If the loan proceeds are used for something else (for example, to pay off debt) in 2018 through 2025, the interest is not deductible.

See this FAQ: https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-re...

Texas RogerAnswer

Interest on home equity loans or lines of credit are still deductible, but only if the loan is used to buy, build, or substantially improve the home and the total mortgage doesn’t exceed $750,000.

If the loan proceeds are used for something else (for example, to pay off debt) in 2018 through 2025, the interest is not deductible.

See this FAQ: https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-re...

sibbs

What if you're only combining a first and second mortgage, is that "buying" under this definition?

tomchang75

Hi,

My question is is Home equity interest paid from my main home used to purchase a rental property tax deductible? Does this qualify ?

JotikaT2

Yes.

You would be able to deduct the mortgage interest expense related to your Schedule E to offset your rental income instead since this interest is related to this rental property.

Since the rental property is not related to your home, you would not be able to deduct the mortgage interest as an itemized deduction.

[Edited 3/8/2020|2:36pm PST]

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MikePrime108

Lets say you get a heloc and you make a 25k draw to lock in the 'introductory' rate. For example, you draw it as cash into a checking account then pay for home improvements using that checking account, does that sill count? If so what kind of documentation would I want to save here? I'd hate to lock in a introductory rate, only to find its not tax deductible.

NCPERSON1

@MikePrime108 as long as you have supporting documentation that the money was used on home improvements that extend the life of your home, and you don't exceed $750,000 in total debt (including the first mortgage), you'll be fine.