Question

I am doing a cash out refinance on my primary residence. The cash out funds will be used to pat down an investment property mortgage. Since the funds are being used on an investment property, would th

Forum|Forum|5 years ago
October 27, 2020
1 reply
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The post got cut off. “ would the refinance costs be tax deductible against the rental income from the investment property?

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Opus 17

Employee

Yes, but...

The refinance of your personal property to raise money for investment property will only be deductible as an expense on the business property so long as you maintain an absolutely clear paper trail/money trail between the refinance and the investment property. You will need to show, if audited, that your costs were purely related to your business income. As soon as you start mixing up the money (such as, using part of the refinance to pay personal bills, buy a car, take a vacation, etc.) then it becomes more difficult to determine what part of the cost is a legitimate business expense and the deduction will be at risk if you are audited

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brogge11Author

Thanks. The company doing the refinance is the same that holds the mortgage for the investment property. They will take the cash out money and apply it directly to the investment property mortgage so the paper trail should be clear.