Interest on Refi-Cashout Mortgage - Interst Tax Deductable?

[virs]

What is the name of your state? NC

I buy real estate at FC auctions at the court house, fix them up and rent them out.

When I purchased 2 such properties in 2006, I had the loan arranged through a broker who did not care about walk through appraisal and lent me the $$ based on on-line appraisal . In my 2006 tax return, I deducted the interest on these loans as expenses.

I purchased another foreclosure property in 2007. However, due to sub-prime loan crisis, no lender was willing to give me mortgage without a walk through appraisal (which was impossible when you purchase a property at the court house auction). Therefore, I borrowed money from HELOC against my existing properties and closed the deal.

After I purchased the house, I did a refi-cash out on the new property (now able to appraise and the lender was happy ). I paid off my HELOC loans.

In 2007 tax return, can I claim the interest on the refi-cash out mortgage as expense? Is there a catch here?

 

[tranquility]

I would take the interest on the HELOC amount used on the property as an expense against the property. Make sure you don't take it twice. The refi should be taken appropriately. If you didn't pay things back, make sure you limit your deductable interest according to the rules.

 

[virs]

I would take the interest on the HELOC amount used on the property as an expense against the property.

OK. So I take the interest I paid on HELOC as expenses against rental in-come.

Make sure you don't take it twice

Ok.. I will not use this against the HELOC property but only on the new property.

The refi should be taken appropriately. If you didn't pay things back, make sure you limit your deductable interest according to the rules.

Need some clarification. This is where I spent most of my interest in 2007. Can I deduct this interest against the property that i borrowed this against?

 

[tranquility]

It's not time to ask a question, but to put out the numbers. What, exactly, are you talking about and how does it relate to the limitations on the deduction of interest regarding home loans?