Comments on: Is home equity loan on a rental property tax deductible?

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By: Wayne Z

Wayne Z — Sat, 13 Mar 2010 19:20:16 +0000

No.

The rules are different between your residence and rental property when it comes to mortgages and other home loans.

With rental property, there is something called the “Trace Rule”. In order for the interest to be deductible, you have to be able to “trace” the usage of the funds to the rental property itself.

Using a home loan, secured by the rental property, to pay down your mortgage on your residence makes the interest on this loan personal and non-deductible.

By: ninasgramma

ninasgramma — Sat, 13 Mar 2010 18:28:03 +0000

The interest on the loan secured by your rental property is deductible if the loan is made for a business purpose. For example, if you were improving your rental property or purchasing other business property.

However this is personal debt which is not secured by your residence. No deduction is allowed.

By: Igolubcpa

Igolubcpa — Sat, 13 Mar 2010 17:37:40 +0000

Interest on the home equity line is deductible.

Any interest you pay on the rental property is deducted on Schedule E along with all other rental expenses.

By: Ryan M

Ryan M — Sat, 13 Mar 2010 16:51:22 +0000