Interest on HELOC deductible if used for investment down payment

Austin, TX · Member since 2018 · 17 posts · 10 votes

Now that the interest on a HELOC isn't deductible on a primary anymore, I was wondering if it could be deducted as a rental expense if used as a down payment? I'm about to make an offer on a single family home using funds from my HELOC and it will take me some time to pay down the HELOC (higher rate than a conventional investment loan).

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
7y
Originally posted by @Praveen Kumar:
Now that the interest on a HELOC isn't deductible on a primary anymore, I was wondering if it could be deducted as a rental expense if used as a down payment? I'm about to make an offer on a single family home using funds from my HELOC and it will take me some time to pay down the HELOC (higher rate than a conventional investment loan).

Yes, the interest is traced to the investment and deducted at that level.
The place of deduction varies based on type of entity you put or not put in place.
Keep an audit trial of the flow of the fund to show it was used for a specific purpose.
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Praveen Kumar
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Austin, TX · Member since 2018 · 17 posts · 10 votes
7y
Originally posted by @Ashish Acharya:

Yes, the interest is traced to the investment and deducted at that level.
The place of deduction varies based on type of entity you put or not put in place.
Keep an audit trial of the flow of the fund to show it was used for a specific purpose.

That's awesome! Will make sure I keep the documentation. Thanks for the quick advice!

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