Is home equity loan on a rental property tax deductible?
I own a home right now where I am still paying PMI. I also have a rental property. I would like to take a home equity loan on the rental property to pay-off some of my mortgage so I will not have to pay PMI to my first home anymore. Will the interest I pay on the home equity loan on my rental property be tax deductible?
October 6th, 2009 at 4:36 pm
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October 6th, 2009 at 4:36 pm
No
October 6th, 2009 at 4:36 pm
Any interest you pay on the rental property is deducted on Schedule E along with all other rental expenses.
October 6th, 2009 at 4:36 pm
Interest on the home equity line is deductible.
October 6th, 2009 at 4:36 pm
The interest on the loan secured by your rental property is deductible if the loan is made for a business purpose. For example, if you were improving your rental property or purchasing other business property.
However this is personal debt which is not secured by your residence. No deduction is allowed.
October 6th, 2009 at 4:36 pm
No.
The rules are different between your residence and rental property when it comes to mortgages and other home loans.
With rental property, there is something called the "Trace Rule". In order for the interest to be deductible, you have to be able to "trace" the usage of the funds to the rental property itself.
Using a home loan, secured by the rental property, to pay down your mortgage on your residence makes the interest on this loan personal and non-deductible.
October 6th, 2009 at 4:36 pm
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October 6th, 2009 at 7:10 pm
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October 31st, 2009 at 8:03 am
Other variant is possible also