I have just refinanced my house and withdrawn some equity. I planned to use some of the equity to pay off a line of credit. I now realise (thanks to you) that I could make the additional amount that I have put on my mortgage tax deductable - if I play my cards right.
I have a rental property the rental income from which I now plan to use to pay off the line of credit. The equity that I recieved from the refiance I plan to use to pay the mortgage on the rental property. If my understanding is correct this would make that portion of the refiance tax deductable.
The only problem is that it will take me many months to pay off the line of credit as my rental income is not that high. I am paying non tax deductable interest on the line of credit while I have the money (from the house equity) to pay it off in full sitting in a savings account earning a poultry amount of interest.
My question is "can I put the equity into the line of credit and use the line of credit only on mortgage and other expenses for the rental property and still claim that the refianace is tax deductable? Or would the refiance be considered to be used to pay off a personal debt (thereforenot tax deductable) and the paper trail end there?"
If I could do this it would allow me to "save" my rental income while keeping my interest payments at a minimum. If I can do this would be able to also be able to "save" my rental income in the line of credit, therefore keeping it always paid off? eg. $1000 out of the line of credit to make the mortgage payment, $1000 into the line of credit from the rental income to bring the balance back to $0.
Thanks for your help