Deductible Heloc interest?

This is one time I'll offer the way I read the IRS wording with the warning that I am not certain. I'm sure others will chime in and offer a stronger opinion. Reading

In other words, I read the wording in the reference that so long as you can show that no more than 100K is 'personal' HELOC debt, it's all deductible. Had you paid the HELOC to zero, and now borrowed $142K, only $100K is deducted.

Joe

Even if this was a HELOC, the portion of the loan you can trace to buying, building or remodeling may be treated as Acquisition debt, with a $1million principal limit. The rest is home equity debt, with a

snipped-for-privacy@panix.com (Arthur Kamlet) wrote in news:gli19g$maf$1 @reader1.panix.com:

Is that trace as original buying, building or remodeling costs, or do I have to take into account how far I paid down those debts over the years?

JoeTaxpayer wrote in news:glhu8q$mas$ snipped-for-privacy@news.motzarella.org:

Thanks, Joe, in other words, the lowest the outstanding balance got is wat counts as remodeling/acquisition debt, and 100K on top of that is what should be considered as allowed for reasons of interest deduction. Great!

I think you are asking about a refinance? If so, the refinanced loan retains the same character as the original loan.

If some of the new loan replaces home acquisition debt, consider it as home acquisition debt.

I agree with this answer but with the warning that the 67K has to be added back too taxable income when calculating AMT. It might turn out that this is enough to generate some AMT.

Bob B

========================================= MODERATOR'S COMMENT: Are you sure the loan amount has to be added to AMT income, not just the interest on HEL principal?

From the instruction for form 6215:

"Eligible mortgage. An eligible is a mortgage whose proceeds were used to buy, build, or improve your main home or a second home that is a qualified dwelling. A mortgage whose proceeds were used to refinance another mortgage is not an eligible mortgage."

I trust this means another, as in a third home, not the original home refinanced thru a HELOC. Bob, you are correct, the non-home interest can impact AMT figures. (I corrected your quote to clarify your intent) Joe

To clarify, just because it is not an eligible mortgage for purposes of AMT does not mean the interest is not deductible under AMT. In a refinance, the interest on the amount of the new loan that does not exceed the lowest balance of the original eligible mortgage is still deductible for AMT.

(This reminds me of a similar counter-intuitive use of language regarding Roth IRAs, in which a non-qualified distribution can still be complete tax- and penalty-free. Terms like "non-qualified" and "not eligible" are not always necessarily bad in tax terms).

-Mark Bole

snipped-for-privacy@panix.com (Arthur Kamlet) wrote in news:gli2g7$8n1$ snipped-for-privacy@reader1.panix.com:

Thanks. The situation is quite complex. Our current home is our second primary residence. The first home was sold soon after I moved to this one (in 1998).

I paid for the current home with financing using a second mortgage on the first home, plus a TIAA loan. Then I paid off the heloc on the first home and got a second mortgage/HELOC on the new home, and paid off the TIAA loan. This HELOC was also with in mind the ~85K of remodeling and associated costs we intended.

The HELOC was refinanced twice during the last 10 years. So it is really confusing to say what is acquisition debt on the current HELOC, which is why I have stayed under 100K indebtedness. Family reasons, as well as repairs/improvements to this house now suggest I go over the