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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29964
Experience:  Taxes, Immigration, Labor Relations
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I purchased a rental property with the downpayment from my

Customer Question

I purchased a rental property with the downpayment from my home equity line of credit. The amount was $30,000 on my home equity line. I now rent the property and have made a small profit on the rental unit. Can I begin to repay my loan on my home equity line and deduct my repayment from the profit on this rental property?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
When you took the loan from the home equity line - that amount was NOT reported as taxable income - correct?That is because it was realistically expected that the loan woudl be paid back.
Expert:  Lev replied 1 year ago.
So when you pay it back - you woudl not be able to deduct the principal.Instead - you will deduct the purchase cost as depreciation - that is regardless if you paid with your own money or used a loan or a combination of both.In additional - you will be able to deduct interest on that home equity line of credit - generally - you would have two options - to deduct that interest on schedule A as home mortgage interest OR because the loan was used for rental activity - you may deduct that interest on schedule E...I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.