Rental Property Investor · Romeoville, IL · Member since 2014 · 8 posts · 3 votes
Hi,
I am considering a Home Equity Loan (HEL) on my current residence (free and clear) to purchase a rental property. Is the HEL interest tax deductible considering the changes in the tax code? Thank you.
I am considering a Home Equity Loan (HEL) on my current residence (free and clear) to purchase a rental property. Is the HEL interest tax deductible considering the changes in the tax code? Thank you.
The interest is deductible against the rental property. Deductibility follows use. For example lets say you have a $100,000 HEL and you spend $40,000 on Rental Property A, $25,000 on Rental Property B and $35,000 on your kids college. When you do taxes, you split the interest expense. You deduct 40% on Rental Property A, 25% on Rental Property B and the remaining 35% cannot be deducted on your taxes because it is a personal expense. When you use HEL funds, keep careful records for tracing the funds in an audit.