My wife and I, both retired, living primarily on tax-deferred IRA savings, have two HELOCs, from separate banks, taken out 4 or 5 years ago, totaling $750K total, about $450K actually borrowed, one backed by primary home, one by second home, the borrowed funds from both them used for major room additions to the two properties.
My best assessment is that interest payments on both should basically be deductible. Concerns arise, however, because:
1) Late each year we receive a large mandatory minimum distribution payout from my IRAs ($100K round number); park it temporarily in one or the other of these HELOCS; then gradually draw roughly the same amount back out and live on it for following 12 months.
2) We have also from time to time transferred funds between the two HELOCs, shifting more of the total amount borrowed to the HELOC with the temporarily lower interest rate.
Are either of these actions likely to mess up the deductibility of the interest payments?