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When all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.
Deductible interest incurred to produce rents or royalties Schedule E (Form 1040)
https://www.irs.gov/publications/p936/ar02.html#en_US_2016_publink1000230022
Allocation of Interest
The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. If you use the proceeds of a loan for more than one type of expense, you must allocate the interest based on the use of the loan's proceeds.
Allocate your interest expense to the following categories.
Nonpassive trade or business activity interest.
Passive trade or business activity interest.
Investment interest.
Portfolio interest.
Personal interest.
In general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses.
https://www.irs.gov/publications/p535/ch04.html#en_US_2016_publink1000243081
When all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.
Deductible interest incurred to produce rents or royalties Schedule E (Form 1040)
https://www.irs.gov/publications/p936/ar02.html#en_US_2016_publink1000230022
Allocation of Interest
The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. If you use the proceeds of a loan for more than one type of expense, you must allocate the interest based on the use of the loan's proceeds.
Allocate your interest expense to the following categories.
Nonpassive trade or business activity interest.
Passive trade or business activity interest.
Investment interest.
Portfolio interest.
Personal interest.
In general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses.
https://www.irs.gov/publications/p535/ch04.html#en_US_2016_publink1000243081
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