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Pub 936...glazed eyes, again... please bear with me on this. An example: Rental condo $100k, first mortgage $80k, 20% down payment in the form of a $20k HELOC plus capitalized closing costs $1,150. After closing we would have a $21,150 HELOC mortgage/loan all related to the acquisition of the rental condo.

Given this example, all of the interest on the HELOC would be deductible on Sch E for the condo, correct?

Interest on future draws on the HELOC for condo related expenses (e.g., repairs, improvements, etc.) would also be deductible, correct?

Interest on future draws on the HELOC for personal purposes would NOT be deductible, correct?

As long as we do not exceed the $100,000 limitation, no problem, correct?

Close. You have the rental interest correct.

For the personal mortgage and HELOC interest you have to ignore the rental property and any principal borrowed to finance it. You can deduct the interest on an additional $100K of HELOC principal beyond the amount borrowed for the rental. This $100K of principal will be reduced if you've already refinanced your primary mortgage and taken additional cash out.

IRS Pub. 936 is pretty straightforward as long as you remember to treat the rental and personal borrowings as independent of each other.

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