Financial Channel

Guys,

HELOC interest is tax deductable as you may know. My question is woldn't it be smart to pay the HELOC down as soon as possible and then pay whatever expenses you have using the HELOC?

This way, in essence, you are paying your living expenses and at the same time you can deduct these same expenses from your taxes. In other words you are letting your spending become tax deductable.

Anyone know what I'm getting at?

If you let money sit in an interest bearing account, you may have to pay taxes on that interest depending on the amount but with a HELOC you can borrow against money you just put in and it becomes a deduction.... That's what I'm trying to say.


Thoughts? ...

I'll be damned! just make sure that you don't go over the 50% mark on your untilization if it is being reported as a revolving.......decent idea but I am not a tax man.......hmm, makes ya wonder though.

I GUESS...if the interest rate is reasonable...

Yeah, you could do that but why carry a balance on anything? Then you pay interest but get hardly nothing back at tax time. Even though it's tax deductible it may not be enough to even itemize and if you do it's only pennys on the dollar that it would save you! Using a HELOC for living expenses can get bad if you lose your job cause then you may not be able to keep up with payments and lose your home.

So you want to pay interest on living expenses? In order to deduct your HELOC you need to carry a balance and in essence you are paying interest on living expenses when cash does quite well. It just doesn't seem worth it in the long run.

I have a HELOC but I don't use it....it's paid in full.

Plus you pay higher interest on a HELOC then any savings account can pay....or MMA either. So why carry a balance and pay more?