Rental interest deduction

[Holver Rivera]

If cash out proceeds from rental property are used as down payment for owner occupied property, is interest expense on rental property eligible for tax deduction? If not, does the timing of the transaction have any impact? Thank you!   

[Kyle J.]

Originally posted by @Dawn Brenengen:

@Holver Rivera Yes, if you refinance a rental, all the interest you pay is considered an expense against your rental income, no matter what you use it for.

I’m not sure that’s true about “no matter what you use it for”. What about the Interest Tracing Rules? Seems like if the money was used for a personal expense it wouldn’t be deductible. 

I’m not a tax pro but here’s some more reading:

https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest

Perhaps an actual tax pro will chime in on here and clarify. 

@Michael Plaks? @Brandon Hall?