HELOC - Payoff with conventional loan, taxed?

3 Replies

We got a slight discount on a rental property with a cash offer. We are funding with a HELOC but quickly taking a conventional loan to payback the HELOC. Can we have the loan wired to the HELOC account directly or is the only option to have it wired to our personal account, opening us up to being taxed on the amount as income, before wiring to HELOC account?

Just because cash shows up in your account does not mean it is taxable.   As you get going in real estate investing getting cash that is not taxable SHOULD happen to you all the time.  (To use another example, would you get taxed for transferring money from your checking to savings account?)

In the case you outlined, whether the HELOC is repaid directly or through your bank account, should have no bearing on your taxes. Just learn how to track all this stuff correctly so your tax preparer can fill out your taxes correctly.

Originally posted by @Marina Macartney :

We got a slight discount on a rental property with a cash offer. We are funding with a HELOC but quickly taking a conventional loan to payback the HELOC. Can we have the loan wired to the HELOC account directly or is the only option to have it wired to our personal account, opening us up to being taxed on the amount as income, before wiring to HELOC account?

The conventional loan would be debt, so no taxes on it. If that was the case all the gurus would be bankrupt.