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Is a mortgage on our rental house tax deductible?

August 10, 2011

From:  Abe
Date:  1 Sep 2010
Subject:  Interest Tracing rule

Hi Michael:

We bought a primary residence house A in 1999 for $335,000, with a mortgage of $268,000.

The $268,000 mortgage was paid off in 2005.

In 2009, we borrowed $400,000 as a mortgage against house A to buy our new primary residence, house B. We had two loans, $400,000 on house A and $410,000 on house B. The reason was the $400,000 was a conforming loan with a much better interest rate than a jumbo loan for $810,000.

When we moved to house B, house A was converted to a rental property.

Is the interest for the $400,000 loan on house A tax deductible?

Thank s in advance.



Date:  8 Sep 2010

Hello Abe,


If you refinance house B to wrap in the financing now secured by house A, the interest on the new loan will be tax deductible.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

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Is a mortgage on our rental house tax deductible?

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