Is my HELOC interest deductible for 2018?

12 Replies

I am sure this was probably answered somewhere on this forum, but I was unable to find it.

I took out a HELOC for $51K, and have payed IO payment on it during all of 2018. Not sure exactly what I used this money for, since I had cash in several accounts and didn't specifically earmark this $51K for any specific investment. I know I didn't improve/CapEx in my own home (I rent where I live). But I did use it for investment purposes - such as investing in a property or an apartment syndication. Is this interest deductible on my 2018 taxes. Thanks for taking your Friday (and weekend) to answer my question!

Originally posted by @Kevin Barnard :

Not that I'm aware of. The new wording of a heloc states must be used to improve the property in which the loan was originated from. 

 Hmm.. I guess likely not then. How could one tell what money was used for what thing? It's all a mess of digits on a screen ;) Not really tangible or concrete stuff here..

Originally posted by @Andrey Y. :
How could 'the IRS' tell what money was used for what thing?

I edited your sentence above :) The answer is 'from your records'.  If you don't have the records to back up your deduction, best not to claim it.

@Andrey Y.

Since you rent, you probably will not be able to itemize your personal deductions. That kills a deduction against syndication K1 income.

Your only hope is a partial deduction against your investment property. This would require you to show money trail. Example: $51k got deposited into XXX account. Then 1/3 of it, $17k, was wired to the title company for purchasing YYY property. Then you can deduct 1/3 of the interest you paid against that property.

If your $51k was dissipated without careful tracking - then SOL, izvini.

Originally posted by @Michael Plaks :

@Andrey Y.

Since you rent, you probably will not be able to itemize your personal deductions. That kills a deduction against syndication K1 income.

Your only hope is a partial deduction against your investment property. This would require you to show money trail. Example: $51k got deposited into XXX account. Then 1/3 of it, $17k, was wired to the title company for purchasing YYY property. Then you can deduct 1/3 of the interest you paid against that property.

If your $51k was dissipated without careful tracking - then SOL, izvini.

 I actually wired $50,000 of the $51K to invest in a syndication. Would this count similarly to purchasing an investment property if I made it traceable?

it might be too late since I just submitted my 2018 taxes and the return was accepted. I guess if it was worth it I could ask for an amendment.

I have many syndication investments but all of them have been reporting pretty large paper losses, likely due to cost segregation in the first couple of years.

Originally posted by @Andrey Y. :
Originally posted by @Michael Plaks:

@Andrey Y.

Since you rent, you probably will not be able to itemize your personal deductions. That kills a deduction against syndication K1 income.

Your only hope is a partial deduction against your investment property. This would require you to show money trail. Example: $51k got deposited into XXX account. Then 1/3 of it, $17k, was wired to the title company for purchasing YYY property. Then you can deduct 1/3 of the interest you paid against that property.

If your $51k was dissipated without careful tracking - then SOL, izvini.

 I actually wired $50,000 of the $51K to invest in a syndication. Would this count similarly to purchasing an investment property if I made it traceable?

it might be too late since I just submitted my 2018 taxes and the return was accepted. I guess if it was worth it I could ask for an amendment.

I have many syndication investments but all of them have been reporting pretty large paper losses, likely due to cost segregation in the first couple of years.

 Syndication-related interest won't help you because you do not itemize your personal deductions.

Originally posted by @Michael Plaks :
Originally posted by @Andrey Y.:
Originally posted by @Michael Plaks:

@Andrey Y.

Since you rent, you probably will not be able to itemize your personal deductions. That kills a deduction against syndication K1 income.

Your only hope is a partial deduction against your investment property. This would require you to show money trail. Example: $51k got deposited into XXX account. Then 1/3 of it, $17k, was wired to the title company for purchasing YYY property. Then you can deduct 1/3 of the interest you paid against that property.

If your $51k was dissipated without careful tracking - then SOL, izvini.

 I actually wired $50,000 of the $51K to invest in a syndication. Would this count similarly to purchasing an investment property if I made it traceable?

it might be too late since I just submitted my 2018 taxes and the return was accepted. I guess if it was worth it I could ask for an amendment.

I have many syndication investments but all of them have been reporting pretty large paper losses, likely due to cost segregation in the first couple of years.

 Syndication-related interest won't help you because you do not itemize your personal deductions.

 Gotcha, thanks! Can't wait to go part time in medicine soon, maybe work a few 1099 locums 3-4 months out of the year, and nab that "real estate professional" designation :)

Lots of paper losses on syndications now that I feel like I'm not able to write much of them against my person income.

Still pretty confused on how the 'passive loss limitation' is phased out from $100K to $150K in AGI. This is probably becoming too much for me to tackle on my own. I do my best though ;)

Originally posted by @Andrey Y. :

 Gotcha, thanks! Can't wait to go part time in medicine soon, maybe work a few 1099 locums 3-4 months out of the year, and nab that "real estate professional" designation :)

Lots of paper losses on syndications now that I feel like I'm not able to write much of them against my person income.

Still pretty confused on how the 'passive loss limitation' is phased out from $100K to $150K in AGI. This is probably becoming too much for me to tackle on my own. I do my best though ;)

RE Pro will not help you with syndication losses. It's for properties you "materially participate" in, like your own rentals.