fmaderjr Posted April 9, 2012 Report Share Posted April 9, 2012 A Client refinanced his duplex (50% rental) when he only owed about $5000 and took out a new $115,000 loan. All of this money was used to buy a new 100% rental property. We don't want a schedule A deduction (his itemized without this interest are about $5000 below the standard deduction). I know you can make an election to have home mortgage interest treated as rental interest if it was used to buy the rental property, but only 1/2 of this loan was secured by a residence. What about the other 1/2 of the interest that is secured by the rental portion of the duplex? It can't be deducted on that schedule E because it was not used to buy anything for the duplex. Can I just deduct it on the Schedule E for the new rental because it was spent to buy that property or is there some election I can make to allow me to do it? I can't find any info at all on this issue no matter no matter how much I seach. Any thoughts would be greatly appreciated! Quote Link to comment Share on other sites More sharing options...
OldJack Posted April 9, 2012 Report Share Posted April 9, 2012 >>Can I just deduct it on the Schedule E for the new rental<< I would think that you can under the tracing rules. Quote Link to comment Share on other sites More sharing options...
fmaderjr Posted April 10, 2012 Author Report Share Posted April 10, 2012 Thank you. Researching the tracing rules confirms you are correct. I'm embarrassed to say I had forgotten the term "tracing rules" so my searches weren't turning up any results. Quote Link to comment Share on other sites More sharing options...
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