Question

The 600K cash from a cashout refi was used to pay off a high rate loan of an investment property, can the interests of that 600K being deducted from the rental income?

Forum|Forum|7 years ago
June 4, 2019
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I did a cashout refi of our primary house, and took out 600K cash to pay off a high rate loan for an investment property . Can the interests paid for that 600K being deducted from the rental income of that investment property?

TurboTax Home & Biz Windows

O

Opus 17

Employee

Maybe. It depends on how closely you can trace the loan proceeds to the investment. If audited, the IRS will want you to prove that the interest expense you are deducting as an investment expense is directly traceable to the investment property/income. The more you mix things together and combine them, the more at risk you are in an audit. For example, you should not use part of the loan for the investment property and part for your personal home, or for personal bills, or a vacation.