Author Topic: Using home equity line to pay off rental????  (Read 1397 times)

SAHD

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Using home equity line to pay off rental????
« on: May 06, 2014, 10:31:15 AM »
WeI have reached the 25x spending savings goal, 1.6million not including a payed off house.  I have 2 rentals both with a morgages at 4.6%.  We make too much money to write off anything from the rental houses on our taxes. .  I have a home equity line of credit at a rate of 2.9% I would like to start to pay off the rental houses, I was wondering if I should pay off one of the houses $115k with the line of credit and write off the interest on my taxes, I know it might not me legal, but I have many things I could say that I used the money for to skirt around the tax code.

The 2.9% is adjustable but I think interest rates will remain low for another 2+ years.

any thoughts????


Another Reader

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Re: Using home equity line to pay off rental????
« Reply #1 on: May 06, 2014, 12:32:36 PM »
I paid off a much higher rate rental mortgage using that strategy.  The interest rate was fixed for three years, so I am using the opportunity to pay the HELOC down or completely off if I can manage it.

You do have to be careful with the tax implications.  Thee are limits to what you can deduct on loans over your purchase money mortgage amount.

Poorman

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Re: Using home equity line to pay off rental????
« Reply #2 on: May 07, 2014, 01:42:17 PM »
I believe the first $100k of a HELOC is tax deductible, no questions asked.  Since you are using the HELOC to pay off a rental, you could write off the remaining $15k against the rental income of that property.  It doesn't matter that the lien is against your primary residence. You are still using the proceeds of the loan for your rental business.  Alternately, you could just write off the entire $115k HELOC balance against the rental, but it sounds like in your case it may be less beneficial to do it that way.  You might want to run both scenarios through your tax software or ask an accountant.