Real Estate Line of Credit

Just wondering if someone has a way around this for me - I don't think there is one.
I bought a condo in 2007. I paid mostly cash, but took a margin loan for a few
weeks while I got a home equity line of credit, which I paid off the margin loan with. In 2009 I converted the condo to a rental. Over time I have paid down the line of credit to about $18,000.
I would like to pay it down further but still be able to use it as a personal piggy bank for liquidity reasons. However, I assume that if I do so, the interest will no longer be deductible.
My annual expenses are about $3000 in condo fees, $1600 in property taxes, and $1200 in management fees, which the manager takes off the top from the rent.
Is it true that if I pay down the loan in this scenario, basically the interest would only be deductible on the lowest amount it reaches, but that if I borrowed from the credit line to pay the condo fees, interest on that amount would be deductible also?
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On Friday, April 6, 2012 10:13:30 AM UTC-7, Hank Youngerman wrote:

few weeks while I got a home equity line of credit, which I paid off the margin loan with. In 2009 I converted the condo to a rental. Over time I have paid down the line of credit to about $18,000.

piggy bank for liquidity reasons. However, I assume that if I do so, the interest will no longer be deductible.

interest would only be deductible on the lowest amount it reaches, but that if I borrowed from the credit line to pay the condo fees, interest on that amount would be deductible also?
This sounds correct as it is business interest. Also I don't think the 100k loan limit applies either.
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few weeks while I got a home equity line of credit, which I paid off the margin loan with. In 2009 I converted the condo to a rental. Over time I have paid down the line of credit to about $18,000.

piggy bank for liquidity reasons. However, I assume that if I do so, the interest will no longer be deductible.

interest would only be deductible on the lowest amount it reaches, but that if I borrowed from the credit line to pay the condo fees, interest on that amount would be deductible also?

If the condo is personal use the interest on acquisition indebtedness (on up to $1,000,000 of debt) is deductible if you itemize. If the FMV of the property exceeds the acquisition indebtedness, the interest on up to $100,000 of home equity debt (but not more than the excess of FMV over acquisition debt) is also deductible. If a particular loan balance is a mix of acquisition indebtedness and home equity debt, principal payments reduce the home equity debt balance first.
Money borrowed with the personal residence as security to pay such things as condo fees and real estate taxes, even on that same personal residence, creates home equity indebtedness subject to the $100,000 of principal and excess FMV rules.
If the condo is 100% rental property, interest on debt to buy, maintain or pay operating expenses is deductible on Schedule E whether the property is security for the debt or not. Interest on debt to make personal expenditures is not deductible, even if the rental property is security for the debt.
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