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ptax255
Level 6
July 31, 2023

HELOC timeframe to use the funds

  • July 31, 2023
  • 2 replies
  • 8 views

Hi,

If a client pays for home improvements out of pocket first and draws down on HELOC later (waiting for approval or rate to go down), would that interest be deductible? Is there a time window for it to still be deductible or does the HELOC have to be drawn first and then pay for the improvements?

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2 replies

IRonMaN
IRonMaN
Level 15
July 31, 2023

Sounds more like the client used the HELOC funds to replenish savings rather than used the money for home improvements.  

Slava Ukraini!
    rbynaker
    rbynaker
    Level 13
    July 31, 2023

    There are some safe harbors in the tracing rules.  See if Notice 88-74 answers your question:

    https://www.sjsu.edu/people/annette.nellen/website/225K%20Reading/N88-74.pdf

    You can fall back to the onerous tracing rules if you have to but they're not always friendly.

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