@Opus 17 : Thank you for the detailed response. Is it always the case that we assume the equity debt is paid first, before the acquisition debt, for tax calculation purposes?
Please let me know if I'm understanding this correctly. Based on your response, the equation would then realistically be more like as follows, assuming that the year-end principal is down to 290K:
(300K + 290K) / 2 = 295K ==> Average Total Principal from July to December
(200K / 295K) * (Mortgage Interest Paid on 1098 Form from Refi Mortgage Company) + (Mortgage Interest Paid on 1098 Form from Original Mortgage Company)
*This would be applicable to the original rental property that secured the loan*
To go a little further, if we do use all or a portion of the equity (cash-out) to purchase another rental, would the equation be similar to this, assuming we use the entire 100K cash-out in the example:
(100K + 90K) / 2 = 95K ==> Average Equity Debt Principal from July to December
(95K / 295K) * (Mortgage Interest Paid on 1098 From from Refi Mortgage Company)
*This would be applicable to the newly purchased rental property that didn't secure the loan*
I used the Average of the Equity Debt (which would go from 100K to 90K based on the example) for this equation in order to account for the full mortgage interest balance.
As for the actual numbers, I do plan to figure it all out myself prior to entering into Turbotax as the software doesn't currently have any questionnaires/aides pertaining to this specific question.
