Question

Investment Property Cash Out Refi to pay off another investment property tax implication

Forum|Forum|4 years ago
August 13, 2021
1 reply
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If I do a cash out refi on Investment Property 1 to pay off Investment Property 2, will the big mortgage be all tax deductible? Or since I’m not using the cash out to buy, build, improve, only the original interest portion is deductible? (Interest rates on the cash out refi now would be lower than the 2 separate mortgages)…

TurboTax Home & Biz Windows

Employee

If I do a cash out refi on Investment Property 1 to pay off Investment Property 2, will the big mortgage be all tax deductible?

Assuming the investment property is residential rental real estate, then yes.

The amount refi'd on property A is claimed against property A. The amount used to pay off property B is claimed against property B.

Do be aware that this will complicate things just a bit if you sell one of the properties before the loan is paid off.

Employee

Are the properties being held for rental (business) use?

Tpnkd1314Author

Yes both are residential rental properties.