I am selling my house in 6 mo. and I am taking out an interest only HELOC for that period of time to pay off some debt (cars, student loans...) Is the interest on the HELOC tax deductable?
Taxable boot is applied to depreciation recapture first, then to capital gains from appreciation. How the boot is taxed should be considered in your planning. Only the boot received is taxable, but boot received does not affect the 1031 tax deferral for the balance of the exchange.
Your tax accountant is being too conservative. The IRS does not look favorably upon a refinance just prior or during an exchange, but a refinance after the exchange has closed does not have a taxable impact as long as the property is being used for a qualified 1031 exchange purpose.
In general, the interest paid on the first $100K of a HELOC on your primary residence is eligible for the home mortgage interest deduction.
However, you must itemize your deductions on Schedule A to take advantage of this opportunity.
Taxable boot is applied to depreciation recapture first, then to capital gains from appreciation. How the boot is taxed should be considered in your planning. Only the boot received is taxable, but boot received does not affect the 1031 tax deferral for the balance of the exchange.
Your tax accountant is being too conservative. The IRS does not look favorably upon a refinance just prior or during an exchange, but a refinance after the exchange has closed does not have a taxable impact as long as the property is being used for a qualified 1031 exchange purpose.