AES wrote:
- quote -


Most likely yes for (1). HELOC's are not savings accounts, even though
you talk about "parking" money in a HELOC. Once you pay down an
acquisition debt balance, if you re-borrow the money, it is now equity
debt subject to both regular and AMT limitations on interest deductibility.

The purpose (IMO) of the mortgage deductibility limits is to give people
a tax break primarily for borrowing money to buy, build, or improve
their home, not to provide tax-deductible interest simply for owning a home.

What your bank calls "equity" debt and what is equity debt for tax
purposes are two independent things. See IRS Pub 936 for more
information and the worksheets you need to plow through to determine
actual deductibility of interest paid on debt secured by your home.

From a pure financial viewpoint, why not just "park" your IRA
distribution in a money market/savings/CD? You'd probably be better off.

-Mark Bole

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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?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >