HELOC from Primary residence to buy land and tax implications?

[Max Smetiouk]

Hi,

Could someone share any IRS experience or their stance on tax deductions changes that went into effect after 2017?

Question, can i use HELOC from primary residence to buy land somewhere else and be able to deduct interest that I pay on HELOC?

Thank you,

Max

[Kory Reynolds]

If you are using the HELOC proceeds to acquire land for a property that will be business use in some manner (a rental), then that interest expense from the HELOC would be deductible against that business project. I'll stay out of the weeds of dealing with potentially capitalizing that interest expense to the land while something is actually constructed.

If the HELOC is being used to acquire land for a property that will be personal use, you are out of luck. Mortgage interest is (potentially) deductible as an itemized deduction on Schedule A only if it is secured by that given property. So if the HELOC is in no way secured by this second property, it isn't deductible mortgage interest. If you took out a separate loan secured by the second property, and that will be used as a second residence, then it is potentially deductible - subject to all of the other limitations of personal mortgage interest like the $750k balance cap.