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QUESTION:
I have read your 2001 Newsletter (very interesting BTW) and that is where I first got the idea of borrowing to pay the rental property expenses including the mortgage.
This loan is securied by the personal residence equity and would be tax deductible (against any income). The interest on the mortgage of the rental property is also written off against rental income.
Is this double deduction? Here is the paragraph from your article that recommends this approach? Am I misreading it?
"You must still pay the operating expenses for your small business or pay the mortgage and operating expenses for your rental properties. Where do these funds come from? You borrow them of course (perhaps using the new equity on your personal house as security), and now the interest is clearly deductible on that loan.
..........
... Because you borrowed the money to keep your small business operating or borrowed to keep the mortgage payments, taxes, insurance and repairs current on your rental property,..."
Thanks
SXXXX
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david ingram replies.
It is not a double deduction, it is just a deduction for borrowed money used to make an investment.
The interest on all money to fund a rental house is deductible. If the total deductions exceed the income, there will be a rental loss. The rental loss can be deducted against other income of any kind by putting the loss on line 126.
The same is true on a US return when the expenses exceed the income, the owner takes an active interest in the rental business and the losses do not exceed $25,000.
David Ingram's US/Canada Services
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