I have a question: My sister and I are going into an investment property (50/50) and I understand that interest payments are deductible against the rental income.
1. If she takes a LOC out from her house to make a down payment towards the new investment property, is the interest on those payments tax deductible as well as the interest payments for the investment property’s mortgage?
2. If it is, and we split the ownership 50/50, would I essentially get 50% of those deductions as well?
i.e. Interest payments she pays for the LOC is $2,000, interest payments we pay for the mortgage together is $9,000.
For simplicity sake, ignoring all other costs, rental income is $12,000 so net is $1,000 (12k-9k-2k). So would we then each report $500 income on each of our returns? Or because the $2,000 isn’t what I personally had to pay—would that not be included in my calculation? T776 seems to be the form we’d both use and just split the net income/loss as per the ownership. How would we go about it if I cannot deduct the $2k but she can--or is that not the case?
Thanks
1. If she takes a LOC out from her house to make a down payment towards the new investment property, is the interest on those payments tax deductible as well as the interest payments for the investment property’s mortgage?
2. If it is, and we split the ownership 50/50, would I essentially get 50% of those deductions as well?
i.e. Interest payments she pays for the LOC is $2,000, interest payments we pay for the mortgage together is $9,000.
For simplicity sake, ignoring all other costs, rental income is $12,000 so net is $1,000 (12k-9k-2k). So would we then each report $500 income on each of our returns? Or because the $2,000 isn’t what I personally had to pay—would that not be included in my calculation? T776 seems to be the form we’d both use and just split the net income/loss as per the ownership. How would we go about it if I cannot deduct the $2k but she can--or is that not the case?
Thanks