Tax, SDIRAs & Cost Segregation

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Amar Amar
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HELOC - Interest deduction

Amar Amar
Posted Nov 24 2022, 05:44

Hello,

I bought an investment property with cash from the HELOC on my primary residence. Can I deduct this interest payment as expense on my investment property to offset the rental income?

Thank you for the responses/help. 

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Matt Devincenzo
  • Investor
  • Clairemont, CA
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Matt Devincenzo
  • Investor
  • Clairemont, CA
Replied Nov 24 2022, 06:22

Yes, lookup interest tracing. Essentially you deduct (or don't deduct) interest on a loan based on what it was used for not necessarily where it came from. E.g. your HELOC is on your primary, but the interest isn't deductible against your primary residential expense, it is deductible against the investment property.

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Amar Amar
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Amar Amar
Replied Nov 24 2022, 08:12
Quote from @Matt Devincenzo:

Yes, lookup interest tracing. Essentially you deduct (or don't deduct) interest on a loan based on what it was used for not necessarily where it came from. E.g. your HELOC is on your primary, but the interest isn't deductible against your primary residential expense, it is deductible against the investment property.

Matt - Thank you, that helps. 

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Amby Bhagtani
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Amby Bhagtani
Replied Nov 24 2022, 11:10

Curious what is your HELOC rate? I have been quoted as much as 8%.

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Amar Amar
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Amar Amar
Replied Nov 26 2022, 15:50
Quote from @Amby Bhagtani:

Curious what is your HELOC rate? I have been quoted as much as 8%.


 Check with PNC.  They no longer have the promotional rate that I got but should be around 6. DM if you need contact details.

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Mason Dylan Hernandez
  • Real Estate Agent
  • Dallas Fort Worth Metroplex
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Mason Dylan Hernandez
  • Real Estate Agent
  • Dallas Fort Worth Metroplex
Replied Nov 26 2022, 15:54

How does the payment on that compared to the payment on a conventional mortgage? Did you do an interest only? I am looking to use the equity on my investment property to try to purchase another one so I am very intrigued

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Amar Amar
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Amar Amar
Replied Nov 26 2022, 17:56
Quote from @Mason Dylan Hernandez:

How does the payment on that compared to the payment on a conventional mortgage? Did you do an interest only? I am looking to use the equity on my investment property to try to purchase another one so I am very intrigued

I took on my primary. You will find more options and good rates if it’s on primary. Same doesn’t seem to be the case when tapping the equity on investment property. Since the heloc I have is on my primary, it’s pretty much comparable to conventional mortgage rates with no closing cost and I have an option to go for fixed rate (at 5.85% this month).