I started going down the road of looking up which of these costs are deductible or not but then thought does that matter, is deductability really the question at hand? It was a no-closing cost loan so all those items got rolled into the total loan amount, which my 1098 confirms is $422,000.00, I will be paying interest on that total, so shouldn't it just be a question of how I properly divide that interest deduction between the two properties?
Or should I track 3 categories of interest, 1st for the Primary property portion of the principle balance, 2nd for the Rental portion , and 3rd all the remaining non-deductible portions of the loan including: the $2000 due to the borrower, 13 mo. Homeowner's Insurance, 4 mo. property tax, and appraisal fees?
I guess that third, non deductible, category would also apply to anyone who does a cash out refinance for pulling out cash for purposes not connected to a property (e.g, new car, debt paydown etc.)
