olivia.carmichael[at]gmail.com wrote:

- quote -

Just last week I counseled a client who told me his
intentions were to "cash out" some equity in his rental
property.

- quote -

No. You must prorate the interest according to the
relationship between the pay off figure and the total
refinanced.

- quote -

Same answer as above. Only a percentage of those points and
closing costs will pertain to the rental property. Any
balance of both interest and points and closing costs will
be personal in nature and NOT deductible. Nowhere. Nohow.

To illustrate, if payoff if 50,000 and you refinance for
75,000, then your percentage is 66 2/3% and you can deduct
that percentage of interest and other items on schedule e.

ChEAr$,
Harlan Lunsford, EA n LA

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<olivia.carmichael[at]gmail.com> wrote

- quote -

No, that interest becomes personal, not related to teh
rental property, and not deductible.

- quote -

Not if the loan proceeds are used for personal purposes.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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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

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >