ptax255
Level 7
07-31-2023
08:27 AM
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Hi,
If a client pays for home improvements out of pocket first and draws down on HELOC later (waiting for approval or rate to go down), would that interest be deductible? Is there a time window for it to still be deductible or does the HELOC have to be drawn first and then pay for the improvements?
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rbynaker
Level 13
07-31-2023
08:47 AM
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There are some safe harbors in the tracing rules. See if Notice 88-74 answers your question:
https://www.sjsu.edu/people/annette.nellen/website/225K%20Reading/N88-74.pdf
You can fall back to the onerous tracing rules if you have to but they're not always friendly.
