The IRS and Borrowing from Family's HELOC

3 Replies

I have the opportunity to borrow from my parents' HELOC to put towards the downpayment on a rental. They do not want to make money on it. They would loan it to me and I would be paying back just the P&I on the HELOC. Is that something that I have to still submit any IRS forms?

@Ryan Moore

As long as your lender does not object - a valid concern brought up by @Mark Bookhagen - you do not need any IRS forms. 

What you do need is to ensure that the money you borrowed goes into a separate account used for nothing but your rental business. And from there to closing. It's called tracing rules in the IRS lingo.

Originally posted by @Mark Bookhagen :

The bank is going to have an issue with you borrowing down payment funds for an investment property.

 I borrowed on my previous property and the lender only cared that the money was seasoned for 2 months.