I have been bothered with question for a while, and would appreciate
I own a rental property (mortgaged) with some equity (~40K) in it.
When I file taxes, I use the interest paid on the mortgaged loan for
the rental propety to subtract from the rental income. This helps
deduct the rental expenses to reduce the income tax liability due to
teh rental income. Now, I need some funds to pay off some personal
loans and am planning on refinancing the rental property loan to an
higher amount (reduce equity) but use the recovered difference to go
from a lower loan amount to a higher loan amount and pay-off some
personal loans with that difference. Here is the question:
- If the rental loan is refinanced, it is legitimate/legal to use the
greater interest paid on the new loan and deduct it as a rental
- Can the points and closing cost paid for the refinanced loan be
deducted as an expense on the rental property?
Thank you very much for your feedback in this regard.