On Feb 16, 2:51*pm, "Paul Thomas, CPA" <paulthomascp...[at]bellsouth.netwrote:
- quote -

Thanks. Does that mean once I use the equity line to buy a rental, I
can't refinance that debt to the primary residence in order to qualify
for rental expenses? (even though it was originally used to buy the
rental.)

To make the numbers clear, if I take out $300k from the equity line of
my primary residence and do the following:
$200k -> buy a rental property
$100k -> remodel the primary residence.
Then I should deduct 2/3 of interest on Schedule E, and 1/3 of
interest on Schedule A, right?

Then if I refinance my primary residence for $300k to pay off the
equity line, can I do the same prorate? 2/3 of interest -> Schedule
E; 1/3 -> Schedule A?

Or do I need to refinance the primary residence for $100k, and
refinance the rental property for $200k? Then each mortgage interest
have its own category and can go to different schedules.

Thanks,
Ian

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<deutliu[at]gmail.com> wrote
- quote -


Yes. In fact, using the tracing rules, you have to report that interest
there.



- quote -



Only for your non-rental interst on the house.





- quote -



No. Only the interest on the amount you use to buy the rental property is
rental interest.

Make life easier by keeping the loans separate.




--
Paul Thomas, CPA
Watkinsville, Georgia

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Hi,

I'm thinking to buy a rental property using cash. The cash is from the
equity line of credit of my primary residence (which I owns outright).
Can I report the equity line interest as rental expenses (Schedule E)?
Or should I use mortgage interest deductions (Schedule A)?

If I refinace the balance of my equity line into the first mortgage
later, can I still report the interest as rental expenses?

Thanks,
Ian

--
<< ------------------------------------------------------- > << 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 (2007) - All rights reserved. > << ------------------------------------------------------- >