Quote from @Kory Reynolds:
Quote from @Max Smetiouk:
Quote from @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.
Thank you Korey,
it does leave some options. In order to show land is acquired using Heloc from primary residence, does it need to be in LLC or other legal structure?
No, just document what happened and how the proceeds are used over time. An LLC provides no credence to a given tax position - it is primarily just a means of legal liability protection.
Kory, so if I understand, create trace from HELOC distributions and tie to airbnb activity via receipts or documented transactions for that activity.
Example: bought land with HELOC - show date, purchase price, location, account for other HELOC proceeds in similar fashion?
Thank you
Max
