Hi Everyone,
I have a client who purchased a 2nd home in February of 2006. The purchase price was $230,000 and the acquisition loan amount was $235,000. Home prices in the area skyrocketed during the year so in November of 2006, my client refinanced the property and took out a new loan for $301,750 which was 85% of the appraised value. The acquisition loan was paid off for $245,295 (includes penalties) and $8300 of the refinanced loan was used for improvements to the property. In September of 2007, my client changed the property into a rental and the FMV had dropped down to $235,000. Does this mean that my client can only take 81% ( $235,000 + $8300 = $243,300 divided by $301,750) of the Mortgage Interest on Form 1098 as a Rental Expense?
Thanks in advance for any help,
Sandy
I have a client who purchased a 2nd home in February of 2006. The purchase price was $230,000 and the acquisition loan amount was $235,000. Home prices in the area skyrocketed during the year so in November of 2006, my client refinanced the property and took out a new loan for $301,750 which was 85% of the appraised value. The acquisition loan was paid off for $245,295 (includes penalties) and $8300 of the refinanced loan was used for improvements to the property. In September of 2007, my client changed the property into a rental and the FMV had dropped down to $235,000. Does this mean that my client can only take 81% ( $235,000 + $8300 = $243,300 divided by $301,750) of the Mortgage Interest on Form 1098 as a Rental Expense?
Thanks in advance for any help,
Sandy
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