Today TaxMama hears from John in the TaxQuips Forum with a sweet question. “We are re-financing a loan on a 2 flat. Our daughter, who lives in one unit, will be the primary borrower on the loan; my wife and I will be co-borrowers. My wife and I will be making the entire mortgage payment. May we treat half of the mortgage interest on this loan as a deduction on our tax return as a secondary residence, as long as our daughter is not taking the interest deduction on her return?”
(In one of the shortest answers ever…)
Of course, that will be true as long as – the entire mortgage is under $1,100,000. And since you say you are refinancing, you may only deduct acquisition debt, plus $100,000. That means, your interest deduction is limited to the loan on the balance of the original loan, plus the cost of improvements since you bought the property, plus $100,000.
So if you are refinancing to take cash out, as well as to get the lower interest rate, you may find that your interest deduction will be limited. Please read the rules related to acquisition debt.
And remember, you can find answers to all kinds of questions about refinancing and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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