“Refinancing a Rental: Avoid a Bad Interest-Deduction Trace“
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Refinancing a rental property doesn’t automatically make all the interest deductible. The IRS looks at something else.
Here are three quick takeaways:
1. The way you use the refinance proceeds—not the property securing the loan—determines whether the interest is deductible.
2. A rental refinance can create a mixed-use loan, requiring you to allocate interest between business and personal use.
3. Tax Tip: Keep refinance proceeds in a separate account before spending them. It can help avoid unnecessary tracing issues and preserve your tax deductions.
To get the full story don’t miss my latest issue of the Tax Reduction Letter.
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