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bernie10
Level 3
March 27, 2022
Question

Client refinanced primary residence and used cash out to purchase rental property. How do you allocate mortgage interest?

  • March 27, 2022
  • 2 replies
  • 6 views
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2 replies

sjrcpa
sjrcpa
Level 15
March 27, 2022

Amount used for rental purchase divided by amount of loan = portion allocated ("traced") to rental property.

The more I know the more I don’t know.
    B
    bernie10Author
    Level 3
    March 27, 2022

    If you allocate the percent of the interest to the rental property can you also deduct the amount used to purchase the rental property from the total loan for purposes of the $1,000,000 home loan limitation?

    sjrcpa
    sjrcpa
    Level 15
    March 27, 2022

    I don't know offhand. But you might be at the $750K limit now after the cash out refi.

    The more I know the more I don’t know.
      rbynaker
      rbynaker
      Level 13
      March 27, 2022

      Dump the 10T regs into a bowl with the 8T regs and sprinkle a CCM on top.

      https://www.law.cornell.edu/cfr/text/26/1.163-10T

      https://www.law.cornell.edu/cfr/text/26/1.163-8T

      https://www.irs.gov/pub/irs-wd/1201017.pdf

      Tracing rules are so much fun in late March.

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