Rental Property Refinance Tax Deduction

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Rental Property Refinance Tax Deduction olivia 02-19-2007  Re: Rental Property Refinance Tax Deduction Will Trice 02-19-2007  Re: Rental Property Refinance Tax Deduction Mark Bole 02-19-2007
Posted by olivia on February 19, 2007, 5:02 am Dear All: I have been bothered with question for a while, and would appreciate any advise. I own a rental property (mortgaged) with some equity (~40K) in it. When I file taxes, I use the interest paid on the mortgaged loan for the rental propety to subtract from the rental income. This helps deduct the rental expenses to reduce the income tax liability due to teh rental income. Now, I need some funds to pay off some personal loans and am planning on refinancing the rental property loan to an higher amount (reduce equity) but use the recovered difference to go from a lower loan amount to a higher loan amount and pay-off some personal loans with that difference. Here is the question: - If the rental loan is refinanced, it is legitimate/legal to use the greater interest paid on the new loan and deduct it as a rental expense? - Can the points and closing cost paid for the refinanced loan be deducted as an expense on the rental property? Thank you very much for your feedback in this regard. Olivia Posted by Will Trice on February 19, 2007, 10:43 am olivia wrote: > - If the rental loan is refinanced, it is legitimate/legal to use the > greater interest paid on the new loan and deduct it as a rental > expense? Not sure, but I believe so. > - Can the points and closing cost paid for the refinanced loan be > deducted as an expense on the rental property? Yes, though they must generally be amortized over the term of the new mortgage. See IRS Publication 527. -Will Posted by Mark Bole on February 19, 2007, 10:54 am olivia wrote: > - If the rental loan is refinanced, it is legitimate/legal to use the > greater interest paid on the new loan and deduct it as a rental > expense? > - Can the points and closing cost paid for the refinanced loan be > deducted as an expense on the rental property? Asked and replied to over in misc.taxes: no, and yes. From a financial planning standpoint, OP can probably benefit on the interest rate charged by using secured debt (such as home equity debt) in place of unsecured personal debt, even without any tax "discount" at all. -Mark Bole Similar Threads Posted Rental Property Depreciation for Current/Previous Year February 21, 2007, 4:58 am Employer floating 401K deduction ? February 18, 2008, 12:51 pm refinance should you claim ira savings ? February 5, 2008, 5:46 am refinance /cash out tax implications February 9, 2008, 2:34 pm Vacation Home Rental October 14, 2006, 12:31 pm Rental Car Collections & Credit Score July 9, 2008, 8:14 pm Refinancing a rental home,help with estimating the amount April 12, 2007, 4:55 am Funding an LLC through the contribution of property July 11, 2007, 12:03 pm Lease to Purchase : Property TAX ? June 19, 2008, 2:39 pm Self-Directed IRA, Investment Property & Mortgage November 28, 2007, 10:07 am