Primary HELOC Interest Deduction
Hello, I have a HELOC on my primary residence that I use for RE investing. I then deduct this interest on my tax return. I am looking at refinincing this now due to interest rates and I have an option to increse the total line of credit. However, I think I read somewhere that you can only deduct interest on $100,000 of HELOCs. Is this correct? If so, what if I took out more than $100,000...would I have to prorate the interest deduction?
Quote:I think I read somewhere that you can only deduct interest on $100,000 of HELOCs. Is this correct? If so, what if I took out more than $100,000...would I have to prorate the interest deduction?Yes to both questions if you are taking the home mortgage interest deduction on Schedule A.
Thank you NewKidInTown3, It is so great that you are willing to spend the time to share your knowledge and expertise.
So, I might be better off, from a tax perspective, to take out a new 1st mortgage (paying off my existing first and my HELOC) and then taking out a new, smaller, HELOC?
My existing first is $100K and my HELOC is 96K with an 80K balance. My house appraises for $260K. I could take out a new 1st for $180K and a new HELOC for 80K...this way all of the interest is deductible.
Obviously, I will have to weigh the closing costs and the existing interest rates with the proposed new ones, etc. in order to make a decision.
Quote:My existing first is $100K and my HELOC is 96K with an 80K balance. My house appraises for $260K. I could take out a new 1st for $180K and a new HELOC for 80K...this way all of the interest is deductible.If your existing first is $100K and your HELOC is $96K, then all of your interest is deductible right now as Home mortgage interest on Schedule A, provided you itemize your deductions.
With your refinancing proposal, you want to take your existing $100K mortgage (your acquisition debt) and refinance that to a total of $260K when the HELOC is added into the mix.
Only the first $100K of your new debt that exceeds your acquisition debt is eligible for the home interest deduction on Schedule A. Under your strategy, your acquisition debt of $100K and the first $100K of your new debt would qualify for the home mortgage interest deduction. The remaining $60K would not be eligible.
Therefore, is it usually advantageous to have your heloc on your investment property(ies) ?
Are there the same limits per acquisition debt on each rental property?
Any stategies here worth sharing per rentals, rehabs, flips and using helocs on primary and/or rentals?
Gratefully! Ce