deductability of heloc interest

Forum|Forum|3 years ago
October 22, 2022
1 reply
33 views

Taxpayer's parents lent $100,000 in order that taxpayer could buy a home. One yea later, taxpayer's home has appreciated and he has taken out a HELOC to repay the loan. HELOC interest is deductible only to buy, build. or improve your home. Can the taxpayer deduct the HELOC interest, since technically, it falls under the allowability rules,

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T

TaxGuyBill

Level 15

Probably not.

The rule is that it must be used to Buy, Build or Improve the home *AND* be secured by such residence.

Refinancing qualifies *IF* the original debt meets the qualifications. So unless the original debt was "secured by such residence", the refinanced amount would not qualify.

B

bandb2Author

Level 4

Hi: Technically, I agree. But practically, the parents lent the cash to the son to buy a home. I think taxpayer has a 50/50 chance of having the HELOC interest expense allowed.

IRonMaN

Level 15

I believe Al Capone thought his odds of committing tax fraud and getting away with tax it was better than 50/50. Tax prep doesn't involve playing the odds, but instead is about understanding the rules and then applying them correctly.

Slava Ukraini!

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