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  1. #11
    Join Date
    Apr 2011
    Posts
    161

    Default Re: HELOC - What Can You Write Off

    I talked to a tax expert. He said due to the Tax Cuts and Jobs Acts (TCJA) a HELOC from primary residence used to buy investment property, you arenít able to write off business expenses unless it is used for the primary house. I have to research into this as it seems new to most people.

    Quote Quoting Taxing Matters
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    It used to be that you could deduct home mortgage interest even if the loan proceeds were used for something other than to purchase the home or to improve the home. That is no longer possible. But you still can deduct the interest paid on the loan to acquire the home and a second mortgage to improve it.



    No. The interest on loan taken out for investment or business purposes is deductable. It doesn't have to be a secured loan and if the loan is secured (like a mortgage) it does not matter what property is used as security for the loan. All that matters is that the person taking out the loan is using the proceeds for business or investment use.

  2. #12
    Join Date
    Oct 2014
    Posts
    7,831

    Default Re: HELOC - What Can You Write Off

    Quote Quoting jyeh74
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    I talked to a tax expert. He said due to the Tax Cuts and Jobs Acts (TCJA) a HELOC from primary residence used to buy investment property, you arenít able to write off business expenses unless it is used for the primary house.
    If that is truly what he said then he's not very informed about interest deductions and you may want to find a different tax expert. Interest you pay on a loan you secured for business use is a deductible business expense (with some limitations). It does not matter what kind of loan (unsecured loan, mortgage loan, etc) you got to finance the loan nor does it matter whether the property used to secure the loan is your house or some other property. The IRS itself tells you this on page 14 of IRS Publication 535, which covers business deductions. In the section on business interest expense, it states the following: "Your trade or business interest expense may be limited. See the Instructions for Form 8990 for more information. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan." (Bolding added.) So what matters is what you use the loan proceeds for ó not what kind of property secures the loan. Similarly, you may also deduct interest you pay for investment income, though the deduction is limited to your net investment income for the year. Again, it doesn't matter what type of loan you used or what property secured it.

    However, what you can't do is deduct interest you pay for a loan you took out for personal use ó buying a car, taking a vacation, or whatever. There is just one exception to that. You may deduct interest you pay on the mortgage you used to buy the home or a mortgage on the home to improve the home. Most of the sites where you see home equity lines of credit being discussed it is in the context of a loan for personal use. And that's why they refer to the limitation that the loan must be used to buy the home or improve the home. Those are still personal expenses, but the tax law does allow you to deduct interest on a mortgage to buy or improve the home anyway. But the interest on a mortgage taken out for any other personal use is not deductible. This limit does not apply to loans taken for business or investment expenses.

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