Cash out refi for the next property

5 Replies

@Jessie Xu , if interest is deductible on borrowings for investment assets, I don't see this as being any different.  

ie.  It shouldn't matter to the IRS what your Lender uses as collateral for the loan.  

You Accountants out there, if I'm wrong about that, please let us know.  Cheers...

Originally posted by @Brent Coombs :

@Jessie Xu , if interest is deductible on borrowings for investment assets, I don't see this as being any different.  

ie.  It shouldn't matter to the IRS what your Lender uses as collateral for the loan.  

You Accountants out there, if I'm wrong about that, please let us know.  Cheers...

The interest is deducted at the new activity, not the old property. 

If you use proceeds for personal use, the interest will not be deductible.  

Thanks @Brent Coombs and @Ashish Acharya ! A follow-up question:

Say I have 100k remaining balance on investment property A, and then I took another 100k out and purchased investment property B. Should I deduct half of the mortgage interest (interest of $200k) to A and half to B?

Any process I need to follow to prove the proceeds was not for personal use? ( For example, is it OK if I deposit the cash to my personal checking account and wire it later when purchasing B?)


Originally posted by @Jessie Xu :

Thanks @Brent Coombs and @Ashish Acharya ! A follow-up question:

Say I have 100k remaining balance on investment property A, and then I took another 100k out and purchased investment property B. Should I deduct half of the mortgage interest (interest of $200k) to A and half to B?

Any process I need to follow to prove the proceeds was not for personal use? ( For example, is it OK if I deposit the cash to my personal checking account and wire it later when purchasing B?)

Ashish already answered your question: "The interest is deducted at the new activity, not the old property".

ie.  There would be no splitting any extra dollars towards property A.

ie.  You can't deduct extra interest against property A if you aren't using the new loan for property A.

How about, use a Tax Accountant (especially regarding the minutiae), ok?  Cheers...