HELOC timeframe to use the funds

[ptax255]

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?

[IRonMaN]

Sounds more like the client used the HELOC funds to replenish savings rather than used the money for home improvements.  

[rbynaker · Accepted solution]

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.