Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Your taxes, your way. Get expert help or do it yourself. >> Get started
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
Tpnkd1314
New Member

Investment Property Cash Out Refi to pay off another investment property tax implication

If I do a cash out refi on Investment Property 1 to pay off Investment Property 2, will the big mortgage be all tax deductible? Or since I’m not using the cash out to buy, build, improve, only the original interest portion is deductible? (Interest rates on the cash out refi now would be lower than the 2 separate mortgages)…

5 Replies
Carl
Level 15

Investment Property Cash Out Refi to pay off another investment property tax implication

If I do a cash out refi on Investment Property 1 to pay off Investment Property 2, will the big mortgage be all tax deductible?

Assuming the investment property is residential rental real estate, then yes.

The amount refi'd on property A is claimed against property A. The amount used to pay off property B is claimed against property B.

Do be aware that this will complicate things just a bit if you sell one of the properties before the loan is paid off.

tagteam
Level 15

Investment Property Cash Out Refi to pay off another investment property tax implication

Are the properties being held for rental (business) use?

Tpnkd1314
New Member

Investment Property Cash Out Refi to pay off another investment property tax implication

Yes both are residential rental properties. 

Tpnkd1314
New Member

Investment Property Cash Out Refi to pay off another investment property tax implication

Thanks but when it comes time to file, I would only get 1 mortgage interest statement with 1 amount so how would that be split up? Do I just get the percentage at time of cash out refi and apply the same percentage for mortgage interest? And does the rule of using the extra funds to buy, build, improve not applicable? Thank you.

tagteam
Level 15

Investment Property Cash Out Refi to pay off another investment property tax implication


@Tpnkd1314 wrote:

And does the rule of using the extra funds to buy, build, improve not applicable? Thank you.


Yes, the rule is still applicable if you borrowed funds in addition to the original balances of your loans.

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.49m
Members

2.62m
Discussions

Manage cookies
v