Refinancing - has anybody done it on IP?

Viewing 5 posts - 1 through 5 (of 5 total)

BorisS
Participant
@boriss
Join Date: 2003
Post Count: 20
April 2, 2003 - 8:01 am
Dear All,
I’m thinking of refinancing one of my IP. I’m not sure if I do that whether I’ll be able to claim interest on the whole amount borrowed?
For example, if my property worth 300,000 and I have 200,000 in debt and I would like to borrow an entire 300,000 (using my other property) for equity. Would I be able to claim interest on 300,000 or only on those 200,000 as I’m not planning to use the difference for the investment purposes.
Any advice would be greatly appreciated.
Boris[]
“A good accountant is the one that on question how much is 2×2 answers how much do you want it to be?”
scratchme
Member
@scratchme
Join Date: 2002
Post Count: 56
April 2, 2003 - 8:59 am
Hi BorisS,
I am not sure whether I understand your example, but the simple answer to your question is:
You can claim the interest on the portion that is used to invest with. (It does not matter where you get the money from)
So let’s say that somehow you have $100,000. If you use $80,000 to invest with then you can claim the interest on that amount (i.e. $80,000).
If you use $20,000 to go on holidays then you can NOT claim the interest on that.
You will also hear people say the the tax man follows the money. (i.e. they look at what you spend the money on. If it is for investing then you can claim the interest as a tax deduction, otherwise you can’t. And it doesn’t matter what you use for equity etc… (i.e. it doesn’t matter where you get the money from. They only look at what it was spent on))
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ziz
Participant
@ziz
Join Date: 2002
Post Count: 90
April 2, 2003 - 9:00 am
Hi Boris
It depends on what you use the money for.
If the money is used to purchase further income producing assets then the money is tax deductable. I
If the money is simply wasted on a home extension, doodat or any other non investment related use then it will not be tax deductable.
So the specific answer to your question
“Would I be able to claim interest on 300,000 or only on those 200,000 as I’m not planning to use the difference for the investment purposes” only the 200k would be tax deductable.
Cheers
BorisS
Participant
@boriss
Join Date: 2003
Post Count: 20
April 2, 2003 - 9:09 am
Thank you very much for your feedback.
I had thoughts along the same lines.
Boris
“A good accountant is the one that on question how much is 2×2 answers how much do you want it to be?”
Old School Skata
Member
@old-school-skata
Join Date: 2001
Post Count: 52
April 3, 2003 - 7:19 am
It is important to note the comments from ziz – funds used to purchase income-producing assets. The investment you purchase must produce income for you to claim the interest costs as a tax deduction. eg You cannot claim the interest costs on funds used to purchase a block of land, unless it generates you an income.