BRRR & IRS Tracing Rules

[Alan Grobmeier]

Has anyone run into irs tracing rules when doing a Brrr or cashout refi on a rental?

Here is a link:

https://borelassociates.com/wp...

Thx

Alan

[Michael Plaks]

Originally posted by @Alan Grobmeier:

Has anyone run into irs tracing rules when doing a Brrr or cashout refi on a rental?

https://borelassociates.com/wp...

Yes, the IRS tracing rules exist and absolutely apply to investment properties. I'm not sure I agree with @Ashish Acharya's characterization of them as taxpayer friendly though.

They are also commonly ignored, both because people do not know about them and because it's a major hassle. The IRS does not really enforce these rules, even during audits, because - well, it's a hassle even for them and is not easily identified.

Bottom line: hardly anybody respects these rules, but you should.

Warning: The link you found has outdated rules. They changed after the recent tax reform, specifically there's no longer $100k home equity option.