Interest On Home Equity Loan Deductible For Rental Property?

Added March 16, 2009 by Ilyce R. Glink

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Summary: An investor is interested in taking out a home equity loan to buy rental income property and is wondering if the home equity loan interest will be deductible as a business expense. More than likely, the interest on the home equity loan cannot be written off as an expense. But taking out a home equity loan on the business property could make it possible to write off the interest on a loan tied directly to the property.

Q: If I take out a home equity loan and use the proceeds to buy rental income property, is the interest on my home equity loan deductible as a business expense of the rental property?

A: Unfortunately, I don't think you can write off the interest you pay on the home equity loan as a rental property expense.

However, you might want to use the home equity loan to purchase the property and then take out a home equity on the business property. Once you have a loan that is tied directly to the rental property, you can write off the interest and any costs associated with getting the property.

For more information on the tax implications of rental property, try Vern Hoven's Book, "The Real Estate Investor's Tax Guide."

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