I do not agree with the initial response........ from pub 936
"Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan. As under prior law, the loan must be
secured by the taxpayer’s main home or second home (qualified residence), not exceed the
cost of the home, and meet other requirements"
As this is an investment property which is not a qualified residence, NONE of the interest from the cashout mortgage on the primary home would be tax deductible. ALL the interest (subject to passive income rules) would be tax deductible if a new mortgage is secured by the investment property.
