I refinanced my home with a $150,000 cash out, which I used to purchase a rental property. How do I split one form 1098 between my schedules A and E?

[PatriciaV · Accepted solution]

It depends. If you used the total proceeds of the refinance to purchase the rental property, you would report all the mortgage interest under Rental Properties for Schedule E.

However, if you split the proceeds of the refinance between the Rental Property and another purpose, you would allocate the interest based on the amounts allocated to each purpose.

For example: If you put $100,000 down on the rental and spent $50,000 on home renovations, then you would report 2/3 of the interest (100K/150K) on Schedule E and 1/3 (50K/150K) on Schedule A.