It's beneficial to be familiar with the qualifications for a home office deduction, even for the non-tax practitioner.First, your activities need to rise to the level of a trade or business. 

I’m in process of learning how rental properties tax deductions work.  

Using a self-directed high deductible health insurance plan.

The conventional loan max is 10+1.In order to finance a new primary residence, I will need to reduce my loan count by 1.I'm hoping to do the following:Cash-out refinance Property A, with a new, bigger first mortgage.Take the proceeds from Property A and pay off Property B.So, In summary, instead of having two small loans on Property A and Property B, I will have one big loan on Property A.I have presented this idea with my CPA, and I was told the cash-out portion of the refinance would not be tax deductible because cash-out refinances must be applied to improvements on the same property.I reached out to a second CPA for another opinion, and they were not aware of any reason why the interest on the cash-out refinance would not be tax deductible as long as the funds were used to pay off a purchase mortgage on another rental property.That's where you come in :).I would like to hear your opinion on the matter, or some possible ideas on how to reduce my loan count by 1 (other than paying it off with cash).

James,Without knowing the Limits, Location (fire protection varies), deductibles, loss history, etc. the comparisons will be difficult.  

500 x 20% : $118K down payment + closing costs ($10K ball park): Total to purchase $128k Reno: $50k + $128k : $178k ADU: $115k plus $178k : $293k All in Rents: $5k x 12 months: $60k Cash on Cash return: 60k divided by $293k : ConC ROI: Gross : 20.4% (I'm sure you will have maintenance expenses, capx, PM etc etc ) and you will also have tax sheltering and deductions: plug in all numbers to get an accurate number). 

.- Tax deductions.

Below $500k, it has no effect.I found another example from a different website: http://www.floresattorneys.com...RIA illustration 2: Jack Able, a single taxpayer, bought a home on Jan. 1, 2009, for $400,000, and uses it as rental property for two years claiming $20,000 of depreciation deductions (thereby reducing his basis in the home to $380,000).

@Aurora MartinezI would deduct from their deposit and explicitly say that could turn a violation of the terms of the lease.

I'm looking for a Accounting firm that has a good amount of experience, knows the ins and outs and loopholes, deductions.