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Investment Interest Deduction
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Stuart A. Bronstein
May 23, 2012, 9:43:35 PM5/23/12
to
I know that to deduct interest on a loan obtained to buy a person's
residence, the loan must be secured by a mortgage.
But if this is rental property, never used as the owner's residence,
is there an issue in buying the property with a loan that is not
secured by mortgage?
Thanks for any insights.
___
Stu
http://DownToEarthLawyer.com
--
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residence, the loan must be secured by a mortgage.
But if this is rental property, never used as the owner's residence,
is there an issue in buying the property with a loan that is not
secured by mortgage?
Thanks for any insights.
___
Stu
http://DownToEarthLawyer.com
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
JoeTaxpayer
May 23, 2012, 10:12:36 PM5/23/12
to
On 5/23/12 9:43 PM, Stuart A. Bronstein wrote:
> I know that to deduct interest on a loan obtained to buy a person's
> residence, the loan must be secured by a mortgage.
>
> But if this is rental property, never used as the owner's residence,
> is there an issue in buying the property with a loan that is not
> secured by mortgage?
>
> Thanks for any insights.
>
> ___
> Stu
> http://DownToEarthLawyer.com
As I read Pub 550, it seems that the loan for rental property doesn't
> I know that to deduct interest on a loan obtained to buy a person's
> residence, the loan must be secured by a mortgage.
>
> But if this is rental property, never used as the owner's residence,
> is there an issue in buying the property with a loan that is not
> secured by mortgage?
>
> Thanks for any insights.
>
> ___
> Stu
> http://DownToEarthLawyer.com
have the same restriction, "secured by the property" as does a first
home. You can buy a rental (or a stock, but not a tax free bond) with a
credit card and that interest becomes deductible given a proper paper
trail. www.irs.gov/pub/irs-pdf/p550.pdf don't take my word, read it, let
me know if you agree.
Alan
May 23, 2012, 10:14:02 PM5/23/12
to
On 5/23/12 7:43 PM, Stuart A. Bronstein wrote:
> I know that to deduct interest on a loan obtained to buy a person's
> residence, the loan must be secured by a mortgage.
>
> But if this is rental property, never used as the owner's residence,
> is there an issue in buying the property with a loan that is not
> secured by mortgage?
>
> Thanks for any insights.
>
> ___
> Stu
> http://DownToEarthLawyer.com
>
There is no requirement that your rental property have a mortgage
> I know that to deduct interest on a loan obtained to buy a person's
> residence, the loan must be secured by a mortgage.
>
> But if this is rental property, never used as the owner's residence,
> is there an issue in buying the property with a loan that is not
> secured by mortgage?
>
> Thanks for any insights.
>
> ___
> Stu
> http://DownToEarthLawyer.com
>
secured by the property. You can use a personal loan to buy the property
and you would be able to deduct the interest on the amount used to buy
the property on Schedule E. The issues are 1. Tracing the proceeds of a
loan to the rental property and 2. Allocating the proceeds of a loan to
different uses and calculating the interest if the loan is used for
multiple purposes.
The easiest way to ensure that the proper amount gets allocated (if
allocation is required) is to keep the funds separate. All of this is
explained in Chapter 4 of IRS Pub 535.
http://www.irs.gov/pub/irs-pdf/p535.pdf
--
Alan
http://taxtopics.net
Mark Bole
May 23, 2012, 10:47:27 PM5/23/12
to
On 2012/05/23 19:14, Alan wrote:
> On 5/23/12 7:43 PM, Stuart A. Bronstein wrote:
>> I know that to deduct interest on a loan obtained to buy a person's
>> residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's residence,
>> is there an issue in buying the property with a loan that is not
>> secured by mortgage?
>>
>> Thanks for any insights.
>>
>> ___
>> Stu
>> http://DownToEarthLawyer.com
>>
> There is no requirement that your rental property have a mortgage
> secured by the property. You can use a personal loan to buy the property
> and you would be able to deduct the interest on the amount used to buy
> the property on Schedule E. The issues are 1. Tracing the proceeds of a
> loan to the rental property and 2. Allocating the proceeds of a loan to
> different uses and calculating the interest if the loan is used for
> multiple purposes.
>
> The easiest way to ensure that the proper amount gets allocated (if
> allocation is required) is to keep the funds separate. All of this is
> explained in Chapter 4 of IRS Pub 535.
> http://www.irs.gov/pub/irs-pdf/p535.pdf
>
To quote someone from another discussion group:
> On 5/23/12 7:43 PM, Stuart A. Bronstein wrote:
>> I know that to deduct interest on a loan obtained to buy a person's
>> residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's residence,
>> is there an issue in buying the property with a loan that is not
>> secured by mortgage?
>>
>> Thanks for any insights.
>>
>> ___
>> Stu
>> http://DownToEarthLawyer.com
>>
> There is no requirement that your rental property have a mortgage
> secured by the property. You can use a personal loan to buy the property
> and you would be able to deduct the interest on the amount used to buy
> the property on Schedule E. The issues are 1. Tracing the proceeds of a
> loan to the rental property and 2. Allocating the proceeds of a loan to
> different uses and calculating the interest if the loan is used for
> multiple purposes.
>
> The easiest way to ensure that the proper amount gets allocated (if
> allocation is required) is to keep the funds separate. All of this is
> explained in Chapter 4 of IRS Pub 535.
> http://www.irs.gov/pub/irs-pdf/p535.pdf
>
"The tracing rules aren't designed to encourage deducting interest."
--
Mark Bole
EA in CA
makbo at pacbell dot net
Stuart A. Bronstein
May 23, 2012, 11:26:46 PM5/23/12
to
JoeTaxpayer <JoeTa...@comcast.net> wrote:
> Stuart A. Bronstein wrote:
>> I know that to deduct interest on a loan obtained to buy a
>> person's residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's
>> residence, is there an issue in buying the property with a loan
>> that is not secured by mortgage?
>
> Stuart A. Bronstein wrote:
>> I know that to deduct interest on a loan obtained to buy a
>> person's residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's
>> residence, is there an issue in buying the property with a loan
>> that is not secured by mortgage?
>
> As I read Pub 550, it seems that the loan for rental property
> doesn't have the same restriction, "secured by the property" as
> does a first home. You can buy a rental (or a stock, but not a
> tax free bond) with a credit card and that interest becomes
> deductible given a proper paper trail.
> www.irs.gov/pub/irs-pdf/p550.pdf don't take my word, read it,
> let me know if you agree.
Thanks to you, Alan and Mark for your help. I appreciate it.
> doesn't have the same restriction, "secured by the property" as
> does a first home. You can buy a rental (or a stock, but not a
> tax free bond) with a credit card and that interest becomes
> deductible given a proper paper trail.
> www.irs.gov/pub/irs-pdf/p550.pdf don't take my word, read it,
> let me know if you agree.
___
Stu
http://DownToEarthLawyer.com
removeps-groups
May 24, 2012, 10:10:14 AM5/24/12
to
"Alan" <temp...@vacationmail.com> wrote in message
news:jpk5h5$4oi$1...@dont-email.me...
million in some cases) limit on the loan -- ie, that only the interest on
the limit amount can be deducted and the rest is lost. And you don't have
to worry about itemized deduction phaseout either, and the interest paid can
generate a net operating loss as well, and it lowers your AGI.
news:jpk5h5$4oi$1...@dont-email.me...
> On 5/23/12 7:43 PM, Stuart A. Bronstein wrote:
>> I know that to deduct interest on a loan obtained to buy a person's
>> residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's residence,
>> is there an issue in buying the property with a loan that is not
>> secured by mortgage?
>> I know that to deduct interest on a loan obtained to buy a person's
>> residence, the loan must be secured by a mortgage.
>>
>> But if this is rental property, never used as the owner's residence,
>> is there an issue in buying the property with a loan that is not
>> secured by mortgage?
> There is no requirement that your rental property have a mortgage secured
> by the property. You can use a personal loan to buy the property and you
> would be able to deduct the interest on the amount used to buy the
> property on Schedule E. The issues are 1. Tracing the proceeds of a loan
> to the rental property and 2. Allocating the proceeds of a loan to
> different uses and calculating the interest if the loan is used for
> multiple purposes.
Not only that, but you don't have to worry about the $1 million (or $1.1
> by the property. You can use a personal loan to buy the property and you
> would be able to deduct the interest on the amount used to buy the
> property on Schedule E. The issues are 1. Tracing the proceeds of a loan
> to the rental property and 2. Allocating the proceeds of a loan to
> different uses and calculating the interest if the loan is used for
> multiple purposes.
million in some cases) limit on the loan -- ie, that only the interest on
the limit amount can be deducted and the rest is lost. And you don't have
to worry about itemized deduction phaseout either, and the interest paid can
generate a net operating loss as well, and it lowers your AGI.
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