For tax reasons: HML draws or pay cash for repairs?
For tax purposes is it better to do hard money loan draws or pay cash for repairs?
Current scenario: House under contract for $105k, needs $15k repairs, ARV of $170k. HML terms are adding $30k to the purchase price which is available for repairs as draws.
The thought I am questioning: Assuming we use only the projected $15k we would draw the remaining $15k from the HML as profit which is tax free, right? vs If we request just the loan for the purchase price and cover repair with our cash then sell would we have to pay taxes on the profit from the sale?
I don't think it matters for tax purposes
You may be eligible to deduct the interest on the HML if it is used to purchase an investment property or rehab/materials for an investment property.
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CPA
- Basit Siddiqi CPA, PLLC
- 917-280-8544
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