Borrowing money in one state and buying in another

[Jeff Shorter]

Hi,

I have a rental property in California that does not have a mortgage on it. I would like to take out a mortgage on it in California and buy a multifamily in Massachusetts. The advantages are that I can get a better rate in California since it is a single family not in an LLC and the property in Massachusetts would be in an LLC.

  My question is: Can I deduct the interest expense in California (11% tax) where the house is while using the money in Massachusetts?  The difference in interest rates and tax rates (11 vs 6%) would save me about $10k a year.