SearchCan I claim tax deductability if I mortgage my rental?
Mark Young asks:
(updated on Friday, August 29th 2008)
Our Experts Answer:
In a situation such as this, the interest on the new loan would not be tax deductible as the money has been borrowed to fund a private non-business purchase. In order to make the interest tax deductible, I would recommend that an entity such as an LAQC or Trust is set up and the property transferred to this new entity at the current market value. The new entity will then go and borrow whatever money it can to finance the purchase so that it can pay you out. This will make the interest tax deductible. However, the downside is that there will be a depreciation recovered issue which may mean that tax will have to be paid. I suggest speaking to an accountant to discuss your situation more fully.Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.
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