Thanks for all the responses to the questions.

Rick,

- quote -

combination of my Credit card offer + a HELOC on the rental property
would the interest on the HELOC on rental and the CC be deductible.
Are there any limitations on deducting interest on refinancing loans
(whether personal or secured by rental property) ?

- quote -


thanks

viper

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"viper" <deep_27[at]hotmail.com> wrote:

- quote -

To be deductible home equity interest, the lender MUST have
a valid lien under local law. Does the credit card company
have a recorded mortgage on your house? If not, no
deduction

Nawarat, Williams & Co. Ltd.
Income tax services for expatriate Americans
L K Williams Nawarat,
Williams & Co., Ltd.
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viper <deep_27[at]hotmail.com> wrote:
- quote -

Loans secured by the property itself fall into three categories:

a) acquisition debt,
b) Home Equity debt,
c) personal debt

The part of the HELOC used to buy, build or improve your
property is home acquisition debt and subject to the 1
million rule;

The part of the HELOC used for any other purpose, from home
maintenance to a trip to Las Vegas, is home equity debt and
subject to the 100,000 rule (andboth a and b are subject to
a few other rules)

The portion of the loan not qualifying for a or b is
personal and interest would not be deductible.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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- quote -

It is true that the $100K limit doesn't apply if the
proceeds are used for home improvement, but the tracing
rules still do.

Simply put, interest on loans whose proceeds were
for personal use (and home purchase and improvement is a
personal use) is only deductible if the loan is
secured by a valid-under-the-law-of-your-state lien
on your home.

When the debt is moved onto the credit card, the
debt so moved is no longer secured by a lien on
your home and is no longer deductible. That the
original HELOC was used for home improvement
doesn't change that.

Now, if the loan was for *business* purposes, then
its interest is deductible whether or not the loan
is secured by a lien on your home because it was
for a business purpose.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Rich Carreiro <rlcarr[at]animato.arlington.ma.us> wrote:
- quote -

The HELOC loan is a variable rate and will rise as interest
rates increase. the 3.99% fixed rate is even lower than my
mortgage rate (5.5%) and fixed till the balance is paid in
full. That is why I wish to transfer the balance.

- quote -

What if the loan was taken for home improvement which is
added to the cost basis of the home. I believe the 100K
HeLOC non-tracing rules do not apply to HELOC amount
borrowed for business purposes and home improvement that
added value to the house.

- quote -

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"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote:
- quote -

In order to have a loan "secured by your residence" the
lender must have a valid lien against the residence
according to local law. In order to deduct the credit card
interest, the credit card issues would have to have a
recorded mortgage on your house.

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deep_27[at]hotmail.com (viper) writes:

- quote -

Nice try, but no. To have deductible home mortgage interest
the loan must be secured by the home. Your CC debt isn't.

Phil Marti
Topeka, KS

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deep_27[at]hotmail.com (viper) writes:

- quote -

Why?

- quote -

No, you will *not* be able to take the deduction.

- quote -

Doesn't matter. The deductibility of mortgage interest is
an exception to the "tracing" rules which say that interest
is only deductible if the loan was for business purposes.
Unless you took out the HELOC to put the money into your
business, the loan was not for business purposes.
Therefore, the general rule would make the HELOC interest
non-deductible. However, there's an exception which says
(up to a limit) interest on debt *secured by your residence*
is deductible even if the debt is non-business-related, and
*that's* why the HELOC interest is deductible.

Once the debt is moved onto the card, it becomes
non-business-related that is not secured by your residence
and thus becomes non-deductible.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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viper <deep_27[at]hotmail.com> wrote:

- quote -

Your financial decisions should consider taxes, but taxes
should be one of several factors in your decision, not the
main factor.

In order to deduct the interest on a home loan, the loan
must be secured by the home. The Credit Card debt is
unsecured, therefore would not qualify for the home interest
deduction.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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My HELOC has an interest rate of 4.5% currently. I have a
credit card offer to transfer balances with a fixed APR of
3.99% for the life of the loan. I would like to tranfer some
of my HELOC balance to the CC.

My question is if I am deducting the HELOC interest
currently will I be able to deduct the interest payment on
the CC too after the balance tranfer as the orginial money
was borrowed as a tax-dedcutible HELOC and this in some ways
is a refinancing..

Obviously I would like to take advantage of the CC offer as
it offers a low fixed interest rate for the life of the
loan..

- thanks

viper

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