This may have been covered previously, however, my searches so far have brought up nil. The question/scenario is:
I have an IP with an I/O loan. I set up a LOC for this property only. The limit of the LOC will be 80% the value of the property, minus the loan amount.
If I pay the interest for the I/O loan and all holding costs for the IP (i.e land tax, council rates, repairs, etc) from the LOC, will the interest incurred on the LOC also be deductable at tax time? To further complicate matters, can I pay the interest due on the LOC from the LOC itself, i.e., incur interest on interest, and still make it a tax deduction?
What I am essentially doing is increasing the loan to 80% of the IP's value.
Comments, pros, cons welcome.
Cheers
Jaaws
I have an IP with an I/O loan. I set up a LOC for this property only. The limit of the LOC will be 80% the value of the property, minus the loan amount.
If I pay the interest for the I/O loan and all holding costs for the IP (i.e land tax, council rates, repairs, etc) from the LOC, will the interest incurred on the LOC also be deductable at tax time? To further complicate matters, can I pay the interest due on the LOC from the LOC itself, i.e., incur interest on interest, and still make it a tax deduction?
What I am essentially doing is increasing the loan to 80% of the IP's value.
Comments, pros, cons welcome.
Cheers
Jaaws