Loans Answers

Home EQ Loan

Question: Is Home equity loan interest paid deductible for rental real estate?

Answer: It depends on what the proceeds were used for. The interest tracing rules come into play here–if you borrow on equity in your rental and then go buy yourself a nice new Porsche (you had lots of equity ) for your personal use, it would not be deductible. If the loan proceeds were used for the rental activity (say to improve the property or even for operating cash to pay expenses), then it would be deductible on the rental. If you use those proceeds to buy stock, then it would be potentially deductible as investment interest….(well, you get the idea).

So, the official answer is that the question as posed doesn’t have enough facts to be answered with either a yes or no.

Realize that the tracing rules can get complex, so if you aren’t doing something dirt simple (like borrowing on the equity to put in an improvement ot the rental property), I’d strongly suggest consulting a competent professional.

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Filed under: Home Equity Loan