Could someone give me an insight into how loans must be structured in order to be able to claim capitalised interest as an income tax deduction - or can this not be done? It seems that various people are doing but I just want to know how.
We could use the example of 1 PPOR and 1 IP. I initially thought I would structure as follows:
PPOR - LOC
IP - IO loan for bulk of loan with another LOC to cover the shortfall each year between the interest charged and the rent received.
However, I understand this would not allow me to claim the capitalised interest as a deduction??
Or do I have it all wrong in that the term 'capitalising interest' simply means increasing debt to service shortfalls and this term has nothing to do with tax deductions.
Any suggestions would be appreciated.
We could use the example of 1 PPOR and 1 IP. I initially thought I would structure as follows:
PPOR - LOC
IP - IO loan for bulk of loan with another LOC to cover the shortfall each year between the interest charged and the rent received.
However, I understand this would not allow me to claim the capitalised interest as a deduction??
Or do I have it all wrong in that the term 'capitalising interest' simply means increasing debt to service shortfalls and this term has nothing to do with tax deductions.
Any suggestions would be appreciated.