HELOC and Capital Gains tax

[Michael Stiranka]

Hello BP!

Question on Capital Gains tax. 

Scenario. We took out Home Equity loan for 100K on my primary residence. We used this money to buy a rental property at 400K. The plan is to keep this property for 3 years and sell it. I'm hopeful with value appreciation at 5%, sale price should be over 450K. 

HELOC = 100k

Purchase =400k

Sale = 450.

Closing cost = at 6% = 27k

Profit = 450-27 = 423 - outstanding mortgage 290k = 133k. So the question is am I taxed on 133k or on 33k when I pay HELOC back?