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Updated almost 5 years ago on . Most recent reply

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Ayan E Das
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Cashout Refinance on Primary residence to buy Rental Property

Ayan E Das
Posted

Hi, I have zero mortgage balance on my ~$750k worth primary residence. I am planning to do a cash-out refinance of ~300k on my primary residence, and use the entire money to purchase a rental/investment property.

Can I deduct the mortgage interest of the cash-out refinance loan on the Schedule E form, and use the mortgage interest against the rental income? I will keep the money from cash-out refi in a separate checking account, and use the money from the checking account to buy the rental property, so that I can clearly show that the money was indeed used to buy the rental.

I have heard opinions that says both yes and no to the above questions, and Google search could not provide a definitive answer.

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