I would like to use the HELOC on my primary residence to purchase an investment property. I will have taxable income in the investment property. I think, under the interest tracing rule, I would be allowed to deduct the HELOC interest on Schedule E for that investment property. Am I correct in my understanding? I will appreciate your comment.
Yes, if you used your HELOC to purchase Rental Property, you can deduct the full amount of Mortgage Interest as a Rental Expense on Schedule E.
Don't include that mortgage interest on Schedule A as an Itemized Deduction, in that case.
Click this link for more info on Using HELOC to Purchase Rental Property.
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