So, for folks that have a primary home and also with the financial means and desire to stack up on more rental property(ies) with cash purchase(s)….
What’s to prevent someone with equity in their primary home from taking out a cash out refinance, and use the proceeds to buy a rental property, and getting their mortgage interest deduction from the “other” way on their rental property income, instead of their primary home?
Seems like all it’s doing for people with the means…is to shift the mortgage interest deduction from Schedule A (primary home) to Schedule E (rental property expense)..And adding some extra work/complication for folks to ensure that loans on the primary property is traceable to the properties that were purchased with the loan proceeds…
In any case, the amount deducted from your net income is more or less the same whether it’s done on Schedule A or Schedule E, provided you don’t have a net loss on your rental properties (for which you would have to carryover and not be able to offset other income unless you are a real estate professional)….
Doesn’t seem like it’s a very effective way to make richer people with the financial means to pay more taxes, if that’s the intent. The only once it seems to hurt are people who only have a primary home who are cash poor with no plan or financial means of acquiring rental properties.
But I guess it does illustrate what a cluster f our tax code is, and why rich(er) people have much more variables to play with….
