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HELCO (by laura [MD]) Apr 12, 2019 9:38 AM
       HELCO (by Laura [MD]) Apr 12, 2019 9:39 AM
       HELCO (by Laura [MD]) Apr 12, 2019 9:48 AM
       HELCO (by Busy [WI]) Apr 12, 2019 10:10 AM
       HELCO (by S i d [MO]) Apr 12, 2019 10:12 AM
       HELCO (by S i d [MO]) Apr 12, 2019 10:21 AM
       HELCO (by Laura [MD]) Apr 12, 2019 10:23 AM
       HELCO (by Busy [WI]) Apr 12, 2019 10:48 AM
       HELCO (by Patrick [VA]) Apr 12, 2019 11:20 AM
       HELCO (by DJ [VA]) Apr 12, 2019 6:25 PM
       HELCO (by AccidentalRental [NJ]) Apr 13, 2019 2:45 AM
       HELCO (by Robert J [CA]) Apr 13, 2019 10:59 AM

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HELCO (by laura [MD]) Posted on: Apr 12, 2019 9:38 AM

I used 2 HELCOs on different properties to purchase 2 separate condos. On my taxes I deduct the interest from the HELCOs against the condos that I purchased with the proceeds (NOT the properties from which the HELCOS were secured against).

I have been doing this deduction for years (and it was legal) on my income taxes. However with the new tax law, as i understand it HELCOs interest can only be deducted against the property from which the loan is secured & only if the proceeds were used to improve the property.


HELCO (by Laura [MD]) Posted on: Apr 12, 2019 9:39 AM

What are folks understanding of this new tax law and HELCOs? --108.51.xxx.xxx

HELCO (by Laura [MD]) Posted on: Apr 12, 2019 9:48 AM

More reading and I am reading that deductions for rental properties are not subject to the limits on mortgage interest deductions. ???? --108.51.xxx.xxx

HELCO (by Busy [WI]) Posted on: Apr 12, 2019 10:10 AM

My understanding is, as long as you were very clear about NOT co-mingling the HELOC funds with monies for personal use, you should be fine in taking the tax deductions for interest expense on rentals. Just be very clear that the HELOC doesn’t ever get used for personal stuff.

Not an accountant, and I don’t have any friends at the IRS. *grin*

Next year’s NOLO publishers’ books about taxes for landlords, small businesses might address this. They might even talk about it in this year’s books, I didn’t pay attention, as I don’t get to use HELOCs. ( husband wants no part of it. Happy husband, happy life.) --70.92.xxx.xxx

HELCO (by S i d [MO]) Posted on: Apr 12, 2019 10:12 AM

Hi Laura....

Unless I'm not up to speed on the latest terminology, it's HELOC (Home Equity Line of Credit), not HELCO. Although considering how banks often treat borrowers, we could imagine these loans from a company that sounds like "Hell, Co." ;-)


My understanding is any interest paid on a loan used to generate business or rental income is deductible on Schedule E, regardless of what asset is securing it. The reasoning behind this is interest on an asset used to produce income is a business expense.

If your CPA says the law insists you deduct the loan interest for Property A against A, even though you used the loan from A to buy Property B then just do that. What difference does it make, really? It'll make A look a bit less awesome in terms of performance, but really all the dollars come and go out of the overall biz account, of which you are the owner. Seems like kind of an arbitrary rule, because money is money, income is income, and interest expense is interest expense.

For more info:

irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law --173.20.xxx.xxx

HELCO (by S i d [MO]) Posted on: Apr 12, 2019 10:21 AM

Btw, you are correct that mortgage interest on rentals is not subject to the same limitations as for a personal residence and/or vacation home. The reason for this again is simple: the interest is being used to generate income; therefore, it is a business expense and is treated just like any other business expense.

Personal residence/vacation home mortgage interest does have an upper limit because that is not related to a business/income generating activity.

So you could rack up $100 Million in rental interest in one year and still deduct the whole amount against the income those houses produce, and if there's any excess left over then (some of) it would go to offset other types of income. But ideally, you're not paying out over 100% of the amount of your rents in interest, as that would be ludicrous and/or a sign of a rental business about to fail.... (*grins) --173.20.xxx.xxx

HELCO (by Laura [MD]) Posted on: Apr 12, 2019 10:23 AM

Thanks for the spelling correction....I am always spelling challenged~

SID using the link you provided these are the words that have me concerned....."The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.".

I am deducting the HELOC from a property NOT used to secure the loan. I have been doing this for years with no issues.

I am going to continue to deduct as before, but i am concerned with this change. --108.51.xxx.xxx

HELCO (by Busy [WI]) Posted on: Apr 12, 2019 10:48 AM

Laura, I think that is a change regarding HELOCs used to finance a vacation, or a new boat, for personal use. I still think you are fine using it for the business. I believe the intent of that wording is to prevent Jo Schmo, who does NOT own a business or investment properties, just has his own house, takes a big HELOC, and buys a big old speed boat to tool around on weekends, just for pleasure. Lots of people got ‘underwater’ on their homes during the housing market meltdown because they had used HELOCs to finance an extravagant lifestyle.

I think you are good in continuing to deduct on Scedule E of whatever rental property the funds were used to finance.

A bit like credit card interest is normally not deductible on taxes. But, mine is, because all of my credit card debt is used strictly for financing rental purchases. (And a nod to Sid, yes, I am working diligently to reduce that debt, might not buy another house till I can pay cash...) --70.92.xxx.xxx

HELCO (by Patrick [VA]) Posted on: Apr 12, 2019 11:20 AM


I faced the same issue last year. My CPA said there is a form to file in the initial year that the money was borrowed / spent. So I borrow 100k against my paid off primary home. I purchase a rental for 110k, and finance 10k. I fill out the form with the IRS showing I borrowed the 100k and placed it as deposit for the rental. Now I can deduct the interest on my primary on my sched E against my rental until it is paid off with no issues. That form is supposed to be filled out in the initial year.

My CPA told me other than that, all loans must stand against the property they are attached to. --70.184.xxx.xx

HELCO (by DJ [VA]) Posted on: Apr 12, 2019 6:25 PM

I had my taxes done by a professional. He clearly told me that the interest on the HELOC form my personal residence, which is used to fund investments, is still perfectly deductible. It would NOT be if it had been used to pay off consumer debt (credit cards, auto loan) or go on a vacation or some such thing.

So don't worry.

(but I'm not a lawyer or CPA - just hired one) --68.10.xxx.x

HELCO (by AccidentalRental [NJ]) Posted on: Apr 13, 2019 2:45 AM

Patrick - Do you remember the form your CPA used to inform the IRS of the business use for your HELOC funds? --73.248.xxx.xxx

HELCO (by Robert J [CA]) Posted on: Apr 13, 2019 10:59 AM

No all tax specialist are up to date on the "ins and outs" of real estate investors. My friends were told by their "tax accountant" the tax liability on the sale of a rental was only $60,000 tops. I calculated it was closer to $225,000. Now with penalty and interest -- it's closer to $250,000.

When I have a "tax" questions I have to consult with many professionals because I get conflicting answers. And the IRS is not help either. Except when they give me bad information, documented, than I'm only liable for the tax and no penalty or interest due. --47.156.xx.xx

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